Prepare sulphur cap plans ‘as soon as possible’, shipping urged

ICS secretary general Guy Platten. Credit: Mark Earthy
ICS secretary general Guy Platten. Credit: Mark Earthy

The International Chamber of Shipping (ICS) has advised shipping companies to start drawing up sulphur cap implementation plans quickly.

“Shipping companies may need to start ordering compliant fuels from as early as the middle of 2019 and they are strongly recommended to commence developing implementation plans as soon as possible,” ICS secretary general Guy Platten said in a statement issued on 17 September.

Announcing the launch of its free guide for companies on preparing for the sulphur cap on 1 January 2020, the ICS said that, for the vast majority of vessels, compliance with International Maritime Organization’s (IMO’s) regulation will mean using fuel oils with a sulphur content of 0.5%.

It warned, however, that, apart from the extra costs involved, compliance would be much more complex than had been the case when regional emission control areas had been introduced.

“This is because of the sheer magnitude of the switchover and the much larger quantities and different types of fuel involved,” it said, “as well as continuing uncertainties about the availability, safety, and compatibility of compliant fuels in every port worldwide.”

If vessels had drawn up suitable implementation plans, it said, ships’ crews would be in a better position to prove to port state control that they had, in good faith, done all in their power to comply with the regulation.

“This need to demonstrate good faith could be particularly important in the event that safe and compliant fuels are unavailable in some ports during the initial weeks of implementation,” Platten said. “And the IMO has provisionally agreed that Port State Control authorities may take into account the ship’s implementation plan when verifying compliance with the 0.5% sulphur limit.”

The ICS statement coincided with Maersk’s announcement that it plans to introduce a Bunker Adjustment Factor (BAF) surcharge that will cover the anticipated fuel hikes once the sulphur limit takes effect.

“The new BAF [Bunker Adjustment Factor] is a simple, fair, and predictable mechanism that ensures clarity for our customers in planning their supply chains for this significant shift,” it said.

The surcharge, which will replace the existing Standard Bunker Adjustment factor and be charged separately from freight rates, is based on anticipated price differences between existing fuel with a sulphur content of up to 3.5% and the new cap-compliant fuel.

It will be calculated on the basis of the average fuel price in key bunkering ports worldwide and a “trade factor”, reflecting average fuel consumption on any given trade lane and variables such as transit time, fuel efficiency, and trade imbalances between headhaul and backhaul legs.

“Combining the two factors gives customers full predictability of their costs at any given fuel price before and after 2020,” Maersk said.

Maersk Line, which recently announced plans to establish a sulphur cap-compliant bunkering facility in the Port of Rotterdam with Royal Vopak, said it anticipates additional fuel costs estimated at USD2 billion once the emissions limit takes effect.

The company confirmed that most of its vessels will use cap-compliant fuels, despite a recent announcement that it plans to invest in a limited number of exhaust gas scrubbers.