A major switch in maritime fuel aimed at reducing emissions from ships is proceeding smoothly, shipping executives say, with new blends available in most ports and operators reporting few problems adapting to the fuel.
The mandatory change began on Jan. 1, when some 60,000 oceangoing vessels were ordered by the International Maritime Organization, the United Nations’ marine regulator, to slash their sulfur emissions by more than 80%. It is the first in a series of environmental steps the maritime industry is due to take in the coming years that will alter operating costs and raise fundamental questions about how ships should be powered.
To comply with the 2016 Paris climate accord, members of the IMO have also agreed to cut greenhouse-gas emissions to half of their 2008 level by 2050. Ships now contribute up to 3% of the world’s global air pollution, a share comparable to that of a major country. Shipping executives say the low-sulfur directive alone will add around $50 billion in new fuel costs over the next three to four years, and they say they plan to pass the expenses on to cargo customers.
Low-sulfur fuel in Singapore, one of the world’s biggest refueling hubs, was quoted this week at an average $670 a ton, 64% higher than the $409 a ton for the heavy oil, known in the maritime sector as bunker, that has long powered ships. Bunkering brokers said the price spread is at least 10% higher than shipowners originally expected, but the gap is expected to narrow over the next couple of months. “It’s very expensive right now,” a senior broker in Singapore said. “Demand is high and many bunkering barges are still flushing the old fuel from their tanks, meaning not enough is out there and ships are held up longer to refuel.” Fuel represents up to half of a ship’s operating expenses, and some operators will see their earnings take a hit this year as the cost is absorbed through supply chains.