ICS says IMO 2020 will raise cost of fuel considerably

Industry body the International Chamber of Shipping (ICS) said the cost of bunker fuel is on track to "increase considerably" when the International Maritime Organisation (IMO) sulphur cap is introduced from 2020.

Low-sulphur fuel is currently around 50pc more expensive than residual fuel, and this gap could rise in line with increased demand as the cap takes effect. The switch could mean bunker outlays for many shipowners near levels seen before the crude price fell in 2014, according to ICS. Given a crude price of around $70/bl, the differential between compliant fuel and the current cost of residual fuel could rise by as much as $400/t, it said in its 2018 annual review.

Enforcing compliance could be complicated if compliant fuels are in short supply and prices increase, ICS said. It said the "vast majority of shipping companies" will comply, but said there is the potential for "noncompliance and the possibility of unfair competition and market distortion". The proposed high sulphur fuel oil (HSFO) carriage ban is one possible solution to this issue, said ICS.

ICS said there is a widespread belief that sufficient compliant fuel will be available in 2020, although this is "impossible to predict with certainty". Even given widespread supply, compliant fuel will be costly and might not be available at every port.

The industry body recognised concerns that blended fuels could differ depending on supplier and the port of availability, which could lead to compatibility or mechanical problems. Such issues could mean shipowners elect to run vessels on the more expensive fuel if the price differential between 0.5pc fuel and 0.1pc distillates is small.

Shipowners with vessels active in Emissions Control Area (ECA) regions will be more likely to burn 0.1pc fuels as standard.

ICS said alternative approaches to compliance, such as the use of LNG or exhaust scrubbers, will increase after 2020 but are likely to involve only a small portion of the fleet.