Sulfur Limits Could Hurt Recovery: ICS

by Ship & Bunker News Team
Wednesday June 11, 2014

The International Chamber of Shipping (ICS) warns that the additional costs represented by the new limits on sulfur emissions in Emission Control Areas (ECAs) could hurt the emerging recovery of the shipping market.

"At a time when the industry may be about to turn a corner following many years of very depressed freight rates, there is thus a real danger that the switch to distillate could inhibit recovery as it begins," ICS said.

Distillate is now about 50 percent more expensive than fuel oil ships are currently using in ECAs, and the price differential may rise as demand increases.

"The most pressing challenge of ECA compliance is economic," ICS said.

"With freight rates still depressed, many shipping companies are unlikely to be able to pass on all of their vastly increased fuel costs to their customers."

The group warned that some trades in North West Europe and the US/Canadian Great Lakes carrying relatively low-value goods might lose viability as costs rise, shifting transport to roads and thus producing more pollution.

ICS notes that ship owners may eventually find the adoption of scrubbers or LNG engines to be a viable solution, although switching to distillate fuels is the dominant path to compliance so far.

The group said the lack of LNG infrastructure remains a challenge for the use of that avenue.

"It is therefore disappointing that a proposal by the European Commission to require that EU ports should have LNG bunkering facilities in place by 2020 has been watered down by EU Member States," ICS said.

"It could therefore be another decade before LNG is widely available throughout European ports."

Analysts have put the extra costs carriers will pass on to customers at anywhere from $29 to $120 per twenty foot equivalent unit (TEU), depending on the route and other factors.