German Bunker Company: Sulphur regulations will spark consolidation

The bunker industry can expect to undergo further consolidation in preliminary stage to 2020, according to global supplier Bomin Group. Due to the upcoming sulphur regulations costs and test credit lines will increase. As a consequence smaller bunker traders could be devoured by larger players across the industry as greater costs for fuel will put pressure on credit conditions across both the bunker and shipping industries.

Read more here: ShippingWatch

How does IMO bunker fuel reform add up for consumers?

The shipping industry looks set to be shaken up by the International Maritime Organization’s decision to cut global bunker sulphur limits to 0.5% in 2020. Most operators will be forced to buy cleaner, more expensive fuels, raising their bills considerably, but that doesn’t mean consumers will endure similarly high prices.

 

It looks set to be a highly disruptive change for shipping, as each company competes for customers by holding to as small a rise in costs as they can get away with. But a closer look at those costs shows the impact felt by consumers may be limited.

But even with price rises of two or three times higher, consumers are not going to notice a big impact on their wallets in 2020 because of the IMO’s decision.

The tricky part for ship operators will be passing on these increased costs in higher freight rates — without losing customers as they do. In an industry that’s already going through a wave of consolidation, that challenge may be too big for some.

 

ON THE RECORD

 

Another view on sulphur 2020:

The global sulphur cap goes a long way to cut harmful emissions but will not be as transformative for the shipping industry nor as disruptive for oil markets as might be excepted.

Industy consolidation and shipping innovation have already unlocked substantial fuel savings that are poorly captured in statistics. With the digitalization set to further reduce the oil intensity of shipping, oil demand growth from the marine sector will likely remain below forecast, which will help blunt the effect of the global cap.

Postponing the rules, as some have advised, would not necessarily give industry more time to prepare. The wait-and-see approach taken by many shipowners is a cautious and rational response to market risks, compounded by potential feedback effects and regulatory uncertainty.

 

http://energypolicy.columbia.edu/publications/report/slow-steaming-2020-innovation-and-inertia-marine-transport-and-fuels