MARITIME REGULATIONS COULD INCREASE SHIPPING COSTS IN 2020
April 11, 2018
The International Maritime Organization (IMO) has set new regulations for the shipping industry that take effect January 1, 2020. The new regulation will reduce the limit of sulphur emissions from 3,5% down to 0,5%.
This is a drastic reduction which is estimated to save hundreds of thousands of lives each year. The pollution from container ships, cruise ships, and other large vessels is greatly attributed to the
bunker fuel they use. Bunker fuel is essentially the leftovers after the more valuable fuels like gasoline and diesel are refined out of raw oil. The fuel is often solid and
needs to be warmed before being burned, resulting in a raw exhaust that pollutes not only the air, but also the port areas where these ships dock.
The new regulations will have a positive effect on the environment, but they also present challenges to the shipping industry. To meet the new emission standards, the ships will need to use different versions of low sulphur fuels, the kind many people use to fuel their cars and SUVs. The demand from the shipping industry will compete directly with current demand for clean burning diesel for personal and commercial vehicles.
Another challenge is the refining capacity. Demand for these cleaner fuels is likely to skyrocket in 2020, but the refining industry is unlikely to have the infrastructure to deal with that demand in place so soon. Key ports in the US and Europe may have access to the cleaner fuels, but secondary ports around the globe, like those used by Specialty Coffee Industry, may not.
HOW WILL THIS AFFECT SPECIALTY COFFEE?
The short answer is cost.
The cost of clean, low sulphur fuel is almost double that of the Bunker fuel that is currently used. That price differentiation could increase even more during the first part of 2020 as demand for cleaner fuel suddenly spikes. Shipping costs will rise as that price increase is passed along to customers.