IMO 2020 emission norms were going to be implemented in 2019 with vigor but the arrival of COVID-19 has sabotaged the project’s gala arrival. The COVID-19 has shaken the whole world, severely hit the global supply chain, and every business and industry including the shipping industry have been severely hit.
When people were looking forward to saying adieu to the year 2019 and were busy catching up with the highlights of the year and the shippers and those related with shipping industry were engaged in looking to Highlights of the 2019 Maritime Industry, then came the pandemic with a hushed voice and soft feet to make the whole world go silent and standstill.
What is IMO?
IMO is short for International Maritime Organization, a special unit of United Nations that was built for improvement and security of international shipping and to provide prevention of huge marine pollutions that ships produce.
Let’s know all in detail about what IMO was going to implement and what is the effect of low start.
The global spread of the virus stalled the vigorous preparations that shipping traders or ship owners were carrying to meet up with the new IMO standards. The IMO new norm was going to give a different transformation that has ever been made in the history of shipping. Where the implementation was going to be a gala affair, COVID rendered it to pass with the lowest key affair.
The rule was going to be made to reduce the sulfur quantity in ship fuel thereby increasing the overall health of humans and the environment. The whole shipping industry, the shippers, and oil refiners were going to be hugely affected by the implementation as the prices of Sulphur less fuel was going to surge. The era of burning old and dirty oil was going to end and it put great pressure on ship owners and oil producers as they have to produce the clean oil by mass production. The sulfur content was going to be dropped by 80% that could have controlled emissions by ships and saved marine life. From January 1, 2020, the marine fuels started coming with 0.5% sulfur content in fuel oil whereas it was 3.5% before the norm was passed.
This drop of sulfur in fuel oil was not only supposed to save the environment but also human life from fatal diseases like lung cancer. The low sulfur fuel would help in stopping acid rain, enhancing marine life, benefitting forests, and crops.
The mariners and shippers in the whole shipping industry were speculating the price surge or usage surge of fuel type after the norm came as some of them believed that there will be an increase in High Sulfur Fuel Oil (HSFO) as it was dominantly present at that time, some believed Marine Gas Oil (MGO) to go up in the less availability of VLSFO but there was a sector like consultants, International Energy Agency (IEA), and major oil distributors who voted that VLSFO will be the dominant fuel choice and the demands will be met.
The Implementation and Start of the Year
The Very Low Sulfur Fuel Oil (VLSFO) distribution started on a good note and dominated the market. Mostly every mariner started to consume it but there were still some who inclined towards Marine Gas Oil (MGO) and Heavy Fuel Oil (HFO). But as good as the start was it started raising some compatibility concerns. VLSFO blend is a mixture of residual and distillate components. Residuals are high on asphaltenes that are present at the bottom of the barrel and distillates have residual paraffin. Paraffin and asphaltenes don’t go well together. When different fuels are mixed together in a tank, the process is known as co-mingling. Co-mingling of different fuels can result in a damaged engine or ship’s fuel tank. The compatibility issues became a plus for tank trader, supplier, container buyer, producer, and manufacturer as the issue was going to lead to more demand for different tank containers to avoid any type of co-mingling. Segregated tanks are going to increase the tank container demand in the market and this will increase the mariners to buy and sell shipping containers.
No Shortage of Fuel
It was assumed earlier that due to the change of oil the prices of sulfur less or cleaned oil was going to skyrocket. The shipping companies were monumentally stressed due to the price rise of fuel. This also gave way to stress as there was the assumption that due to sudden changes in fuel choices can lead to a shortage in fuel supply. But now all the shipping companies or fuel suppliers are complying with IMO guidelines and using or supplying sulfur low fuel oil.
Effect on Price
The crude oil prices went straight down as even during lockdown Russia and Saudi Arabia didn’t stop the crude oil production units. This affected the Very Low Sulfur Fuel Oil (VLSFO) price and also other marine fuels. Every fuel oil’s price was dropped but this led to growth in Low Sulfur Vacuum Gas Oil (LSVGO). Some of the mariners in the shipping industry started using LSVGO as it’s in abundance in place of VLSFO.
Effect of COVID-19
The advent of the pandemic has shaken the whole world and along it with was shaken IMO 2020 guidelines. Along with other businesses and industries, the shipping industry also got shut for long period. Hence putting the IMO 2020 norms backstage. But COVID-19 also managed to erase the tension of low fuel stock. Due to the pandemic, the bunker market was able to manage the global oil refinery complex. With all the vessels standstill the fuel market was able to put its foot towards recovery. The fuel price that was believed to surge has now come back to normalcy.
Due to the lockdown and not stopping of production of crude oil, the VLSFO is abundantly available in the market at nominal prices. With the implementation of IMO’s new norms and increased usage of VLSFO, there has come up a need to segregate the fuel blends in different tankers. This has given a new opportunity to container trading companies, container suppliers, traders, and manufacturers as they can easily fulfill the demand of the shippers by supplying effective tank containers.
The impact of IMO 2020’s new norms and Corona’ effect on the global supply or imbalance in global trade may not be clear yet but for shipping container traders and suppliers IMO guidelines have become a boon and given them a new opportunity of meeting up the needs of the shippers.