INFOMAIL NOVEMBER 2019

Sea Freight: IMO 2020

Dear Ladies and Gentlemen,

For months, shipping companies have been preparing for the implementation of IMO 2020 regulations. From 01.01.2020, seagoing ships must drastically reduce emissions. New regulations apply worldwide: mandatory, with no transitional period. For everyone.

Essentially, either innovative filter systems—so-called scrubbers—will be used or LNG (Liquefied Natural Gas) retrofitting will occur. But most ships will use a third option: bunker petroleum products that are lighter than the relatively cheap heavy oil, which has been the most common to date. In any case, a considerable investment. A cost increase for all carriers.

Consequences for global trade flows by sea cannot be accurately predicted. IMO 2020 is currently causing market uncertainty. Accordingly, all participants are staying silent on the topic. The price level for IMO 2020-compliant fuels will only emerge in the coming months. Many factors influence the innovations. In addition to the already high volatility of oil prices, IMO 2020 is gaining further influence.

Currently, we can only predict that costs will rise. The forecast assumes a short-to-medium-term increase in bunker prices between USD 60 and USD 140 per TEU. The range is wide and reflects the uncertainty.

The fact is that due to greatly increasing bunker prices and necessary investments in technology, every sea freight company will have to realise increasing and more volatile fuel costs on the market. Otherwise, services cannot be reliably maintained. At the same time, we assume that things will become clearer in the coming months. Price adjustments are expected to even out and adjust to fluctuations.

Through the IMO 2020 regulation, the International Maritime Organization (IMO) intends to significantly reduce ships' sulphur emissions. Objective: To reduce the negative impact of shipping on human health, reduce air pollution from emissions worldwide and especially in the coastal areas of the Asia-Pacific, Africa and Latin America.

Everyone benefits from this. Significant improvements include the reduction of strokes, asthma, cardiovascular disease as well as lung cancer and lung disease. Between 2020 and 2025 alone, the IMO estimates that more than 570,000 premature deaths will be avoided due to the new regulations. [Source: International Maritime Organization, June 2019].

It is also clear that sea freight is becoming more expensive for importers and exporters. Even now. Originally, the gradual implementation was expected from the beginning of the third quarter. But that did not happen at first. Now the measure is coming as of 01.12.2019. Shipowners will charge surcharges according to the shipping area and service.

We will gladly keep you informed.
Your SENATOR INTERNATIONAL Team