HSFO Carriage Ban Comes Into Effect

The IMO's carriage ban came into effect over the weekend. Image Credit: Ship & Bunker

The International Maritime Organization's (IMO) long-awaited ban on the carriage of non-compliant fuels came into effect over the weekend, which may prompt the shift of a few more dregs of high-sulfur fuel oil (HSFO) demand into the new very low sulfur fuel oil (VLSFO) blends.

The carriage ban, in operation as of March 1, prevents vessels without emissions-cleaning scrubber equipment fitted from carrying bunker fuel with a sulfur content higher than 0.50%.

The effect of the ban is to grant more power to port state control (PSC) authorities seeking out non-compliance with the IMO's 0.50% sulfur limit for marine fuels that came into effect on January 1.

"As of March 1, enforcement agencies will no longer have to prove usage," the International Chamber of Shipping said in a note on its website on Monday.

"Showing that vessels without exhaust gas cleaning systems have non complient fuel aboard will be enough to prove a violation.

"Major port state regimes including Paris MoU, Tokyo MoU and the United States Coast Guard (USCG), have made it plain that they will rigorously enforce the requirements."

Before the carriage ban came into effect, PSCs could only enforce the sulfur cap within their own waters.

As long as it was burning compliant fuel while in their waters, a vessel could leave their waters with nothing but HSFO left in its tanks and the PSC would be able to do little beyond notifying the vessel's flag state.

With the ban in place, PSCs are now at liberty to arrest ships found to be carrying any non-compliant fuel.

The ban does not affect the transport of HSFO cargoes around the world.

Because of the stricter enforcement measures introduced by the carriage ban, we may now see a further drop in HSFO demand, according to Freight Investor Services.

"With the next phase we may get strange consequences, with any dodgy shipowners still burning HSFO suddenly stopping," the company said in a research note Friday.

"Pleading ignorance won't wash come March 1, so we could finally get that collapse in HSFO prices everyone has been expecting, or perhaps refiners will finally turn the taps off even tighter on the product."

Ships with HSFO unintentionally left in their tanks after January 1 have been debunkering the product since then, with suppliers in some cases reported to have been paying as little as $1/mt to buy back the HSFO.

But there have been reports of the COVID-19 virus outbreak delaying some debunkering operations in Asia, and it is unclear whether there are some ships still waiting to debunker, and how these cases might be treated by local authorities.