There is a saying that the only thing that is constant in our world is a change! It is very easy to believe this saying because policies, mandates, and even our environment change every day.
Today, there is agitation from several angles against global warming and its adverse effects. Some countries and conglomerates are already changing and enacting new policies in response to this call.
Consequently, there is a recent demand for shipping companies to start using less polluting fuels, that is, the low-sulfur fuels. This demand is scheduled to take effect from January 2020. According to the International Maritime Organization (IMO), the Sulphur levels in fuels for ships would have to fall to 0.5 percent in 2020. It means that the nearly 80,000 cargo ships which ply the seas delivering raw materials and merchandise would have to switch to the low-sulfur fuel.
However, the idea is to reduce the emission of highly toxic Sulphur dioxide – a health hazard also responsible for causing acid rain. While such a move means a significant boost to the environment, it comes with its consequences on the end-users and consumers alike.
The first impact on ship owners will likely be an increase in costs. According to Nelly Grassin of Armateurs de France, such possible increase in price is because fuels that meet the new regulations, that is, the low-sulfur fuels, are more complicated to produce and are two times more expensive.
Due to this new demand, cargo firms may then be tempted to raise their rates to ship goods, which could eventually lead to higher prices for consumers. According to Freight Waves, prices are expected to surge in the coming months even ahead of the Jan. 1 deadline as shipping companies test the new fuels and take on fuel ahead of long hauls. However, the limited availability of the new fuels is expected to further push up prices.
Drewry, a London-based consultant, predicts that the demand for low-sulfur fuel will increase considerably by the last two months of the year, that is, November and December, and market conditions will be very different then.
At this point, it is evident that the end-users of goods will have to suffer the consequences of the surge in freight cost. For those in the manufacturing industries who are always in need of a wide range of machinery including used industrial machines to meet their production needs, it merely means that you are going to pay more to have your machines and other industrial equipment shipped to your location.
However, for those who plan on selling their used industrial machines, it also means that you may undergo the same fate, in addition to the stress of completing the paperwork. So far, the percentage increase in the shipping cost is still uncertain and will get more apparent as we approach the end of this calendar year and towards the first month of next year, 2020.
So far, there have been suggestions for cost-effective methods to respond to this mandatory fuel sulfur regulation. One of such ideas is the integration of vessels with a unique system known as Scrubber. According to Clean Shipping Alliance 2020, a scrubber removes sulfur oxides from the ship’s engine and boiler exhaust gases by spraying alkaline water into the vessel’s exhaust. The end product of the scrubbing process is sulfate which is a naturally-occurring constituent of seawater and therefore not harmful to the sea.
To comply, thousands of ships are being taken out of the market to fit these scrubbers that will allow them to keep utilizing the high-sulfur fuels. According to Burak Cetinok, head of research at Arrow Shipbroking Group in London, a rising number of vessels are going off-hire to retrofit scrubbers ahead of the fast-approaching January 1 deadline.
This idea of introducing scrubber equipment and fitting to vessels put little or no effort in curbing the high shipping cost. Instead, freight costs seem to be on the increase. As more and more ships are taken out of the market to fit the scrubbers, it means there will be fewer vessels to handle the large volume of commodities for export. “Basically, you’ve got strong export volumes on the one hand and restricted vessel supply on the other. This has been boosting the rates.” Says Cetinok.
Also, vessels that cannot meet up with these regulations will be suspended, and this will also contribute to the decreased number of available vessels on the coast. Vessel owners will have to factor in the cost of integrating the scrubber. With such situation, there is bound to be a further increase in cost as demand increases. This hike in freight cost gives room to the possibility of carriers resorting to more slow-steaming in the face of more expensive bunkers.
For retailers who focus on selling used industrial machines, it would be wise to liaise with credible online platforms that handle bulky shipping services. This way, it is easier to escape the effect of such a predicted increase in shipping cost due to the new fuel sulfur regulations.
The International Maritime Organization has decided that the sulfur levels in fuels for ships would have to be cut drastically. This new move is geared towards reducing the emission of highly toxic sulfur dioxide which is a health hazard also responsible for causing acid rain.
This recent low-sulfur fuel mandate on the nearly 80,000 cargo ships which ply the seas delivering raw materials and merchandise is expected to cause a hike in shipping costs. There is limited availability of the new fuel, and this is expected to further push up shipping prices.
This hike in freight cost could make it difficult for customers who want to ship goods such as used industrial machines to or from any location.