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Cargo ship loaded with containers close to coast

Advice, Loss Prevention

Latest insights on Sulphur Cap 2020

The new global sulphur limitation for marine fuel is getting closer. From 1 January 2020 only fuel oil with a maximum sulphur content of 0,50% will be approved or a cleaning system is needed.
Get the latest up-date on the new regulations and the impacts on the market.

The deadline is approaching for the new IMO limit and the implementation has started. The choice to use low sulphur fuel or to install an Exhaust Gas Cleaning Systems (i.e. scrubbers) to reduce sulphur oxides should have been made.

Cost and availability
In brief this means big focus on oil prices right now; the cost of high sulphur and low sulphur fuel. In a recent market analysis BIMCO’s Chief Shipping Analyst Peter Sand summarizes the picture from this fall:
“The price for Marine Gas Oil Low Sulphur (MGO LS) has largely remained stable, the price for High Sulphur Fuel oil (HSFO) has been become increasingly more volatile in recent months.”

“The bunker price spread illustrates the tumultuous ride that the bunker market has endured in the last couple of months and similarly, the spread illuminates why the market is filled with uncertainty about the future. From 1 October to 1 November, the spread for HSFO-MGO LS in Rotterdam spread widened 21%, from USD 229 to USD 277 per metric tonne,” says BIMCO’s Chief Shipping Analyst.

The number of ports where low sulphur fuel will be available at the start of 2020 will be limited and the compliant fuel will be an expensive affair for shipowners, according to the Marine Bunker Exchange, MABUX (BIMCO-Bulletin).

Another relevant question is; what will be the impact on freight rates and operations?
“According to current calculations, the expected increase in costs will have a significant impact on the overall prices of container transportation and on freight rates”, according to sea freight providers Kuehne + Nagel.

Amendments on carrying high sulphur fuel
Further, amendments to MARPOL Annex VI which prohibit vessels from carrying fuel oil with a sulphur content of more than 0.50% m/m have been approved by the IMO. Such measures will come into force on 1 March 2020, after which only vessels which are equipped with Exhaust Gas Cleaning Systems (i.e. scrubbers), will be exempt from this prohibition.
Penalties for non-compliance are likely to include fines, detentions and possibly, in extreme cases, PSC banning orders.

Terms and clauses
New charters entered into prior to 1 January 2020, but which will extend beyond that date, will need to contain specific terms to deal with the new regime. To assist, BIMCO has issued two sulphur content related bunker clauses: the BIMCO 2020 Marine Sulphur Content Clause for Time Charter Parties, and the BIMCO 2020 Fuel Transition Clause for Time Charter Parties.


Sources of information – Read more

BIMCO 2020 Sulphur Webinar –  what can you do with 8 weeks to go? » (Nov 2019)

IMO 2020 Market analysis from BIMCO » (Nov 2019)

Shipowners are ready, the bunker market is not: MARBUX » (BIMCO-Bulletin, June 2019)

Legal compliance » (The Swedish Club Sulphur Guide, page 19)

P&I Club Cover and The Global Sulphur Cap 2020 » (Circular from International Group of P&I Clubs, June 2019)

IMO 2020 FAQ » (Kuehne + Nagel)


Member Alert is published by The Swedish Club as a service to members. While the information is believed correct, the Club cannot assume responsibility for completeness or accuracy.