Maritime industry professionals warned at Seatrade Conference in Dubai that new IMO regulations could increase operating costs ‘overnight’ – experts are confident increases can be shared between owners and operators
Maritime professionals attending Seatrade Maritime Middle East 2016 (SMME), have been discussing the ramifications of the new International Maritime Organization (IMO) 0.5% sulphur cap which comes into force in 2020 and could push the price of fuel used to operate ships (bunker prices), by more than US$200 a tonne – a 70% increase.
Essentially from January 2020, the IMO’s Marine Environmental Protection Committee will limit the global cap on sulphur content for marine fuels to 0.5%, representing a significant cut from the 3.5% global limit currently in place. To comply, the world’s shipping fleets will need to either change to a cleaner fuel such as Liquefied Natural Gas (LNG), or install some sort of sulphur reduction process.
“If fuel costs increase by as much as US$200 per tonne, then a proportion of those costs are going to be passed on and there could be trickle down to the consumer, especially in countries heavily reliant on imports by sea such as the UAE. It will depend largely on just how much additional expense owners and operators are willing to shoulder between them,” said Emma Howell, Group Marketing Manager, Seatrade.
According to Stavroula Betsakou, head of tanker research at Howe Robinson Partners, either way the new regulation is not all gloom and doom for the tanker sector.
“The new bunker fuel is likely to be blended by a limited number of refineries which would create opportunities for tanker owners. There’s lots of implementation elements that still need to be decided and some of them relate to exemptions, maybe the IMO will grant exemptions when you can’t find the right quality, a compliant fuel when and where you need it.
“There will be increased demand for tankers to ship compliant fuel blends to areas where they are needed, to correct those regional imbalances.
“But regardless of what type of fuel refiners eventually settle on to meet the new emission requirements, it will be more expensive than current bunker prices. In terms of the price, we could be looking at an extra US$200 a tonne, or even more, overnight. This would equate to around a 70% increase on the current bunker price of approximately US$280 per tonne,” she said.
Betsakou believes the higher bunker prices might not be faced solely by tanker owners as traditional hikes have, but also shared with charterers.
“The IMO 2020 is the first time that the bunkers’ cost is going to go up without oil prices being up, it’s just a quality premium rather than an oil price related premium. Assuming we don’t massively overbuild the market, which I don’t think we will, then there is a much better basis for that extra cost to be shared [by ship owners and charterers], she said.
SMME which closes today (Wednesday 2 November) at the Dubai World Trade Centre, was officially inaugurated by HE Sultan Ahmed bin Sulayem, Group Chairman & CEO of DP World and Chairman Dubai Maritime City Authority (DMCA) in the presence of HE Troels Lund Poulsen, Minister of Business and Growth, Royal Danish Consulate General and Chris Hayman, Chairman, Seatrade and senior government officials and leaders of the regional and international maritime industry.
A number of important announcements were made onsite this year, including Jawar Al Khaleej Shipping (JAK), a leading specialist services supplier to the offshore oil and gas sector in the Gulf, which signed an agreement with Damen Shipyards Group, for the supply of three vessels, one Fast Crew Supplier and two ASD Tugs.
Safwa Marine LLC (a subsidiary of Abu Dhabi Shipbuilding PJSC), and Jalboot Marine Network LLC (part of Emirates Consortium LLC), have signed a Memorandum of Understanding to build 40 passenger luxury marine transportation vessels in Abu Dhabi,
Dammam Shipyard, part of Al Blagha Holding Group, signed a Memorandum of Understanding (MoU) and strategic partnership with KDU World Wide Technical Services FZC. Abu Dhabi Ship Building signed a (MoU) with Top Oilfield to form a specialised team to cater the Oil and Gas industry.
Another highlight of the three-day event was the opening of the 61st annual International Ship Suppliers & Services Association (ISSA) Convention, which has partnered with the UAE National Ship Suppliers Association (UNSSA) to deliver a one-of-a-kind event for maritime industry professionals.
Held under the patronage of HH Sheikh Hamdan bin Mohammed bin Rashid Al Maktoum, Crown Prince of Dubai, SMME, the biennial event, now in its eighth edition, was expecting more than 7,000 attendees from 66 different countries, over the course of the event.
About UBM’s maritime portfolio – connecting customers globally:
UBM is one of the world’s leading B2B events organisers providing vibrant and dynamic events enriched with digital and print media. Its events allow its customers to make connections and do business efficiently and effectively.
UBM has three principle businesses: UBM Americas, UBM Asia and UBM EMEA who together provide high quality Events and OMS activities through regional focus, closely collaborating when brands extend globally. UBM is the largest “pure-play” exhibitions organiser in the world, No.1 International Exhibitions organiser in China, India and Malaysia (Asia) and No.1 Exhibitions organiser in the US.
Included within the UBM maritime portfolio is: Sea Asia; Seatrade Maritime Middle East; Seatrade Offshore Marine & Workboats Middle East; Seatrade Maritime Awards Middle East, Indian Subcontinent & Africa and Seatrade Maritime Awards Asia; Marintec South America; Offshore Marintec Russia; Marintec Indonesia; Marintec China, Sea Japan and Expomaritt.
Seatrade, an integral portfolio within UBM provides a range of global exhibitions, conference, events, awards, news websites and publications that covers every aspect of the cruise and maritime industries.
Founded in 1970, Seatrade connects people and creates opportunities for companies to develop new business, meet customers, launch new products, promote brands and expand markets.
The Seatrade portfolio is headquartered in Colchester, UK, and globally represented
across 23 countries from the UAE and Asia to South America and across Europe. From Singapore, both the Sea Asia and Seatrade Maritime Awards Asia are managed under the umbrella of UBM Asia, the largest trade show organiser in the region, and the largest commercial organiser in China, India and Malaysia.
Seatrade Maritime Review and Seatrade Maritime News are the official titles in print and online for all the UBM maritime portfolio, as well as associated events: Posidonia and gmec.