MEPC Turns Down Soft Rollout for 2020 Sulfur Rule

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By MarEx 2018-10-24 20:59:00

On Wednesday, member state representatives of the IMO's Marine Environment Protection              Committee (MEPC) turned down an industry proposal for an "experience-building phase"                           for the implementation of the 2020 fuel sulfur cap.

BIMCO, Intercargo, Intertanko, the Marshall Islands, Liberia, Panama, the Bahamas and                           the United States had proposed a soft rollout for the sulfur rule in order to avoid "unduly                             penalizing individual ships" for noncompliance when the rule takes effect on January 1, 2020.                    Despite the powerful coalition behind the plan, MEPC has decided to keep its hard deadline                       for now, but it expects to take up new proposals regarding fuel quality at an upcoming                         meeting in May.

Earlier this week, MPEC rejected a challenge to the associated ban on the carriage of                           high-sulfur fuels. For a ship without an approved SOx scrubber or another alternative                         arrangement, the sulfur content of any fuel oil carried for use on board will not be                                       permitted to exceed 0.50 percent after March 1, 2020.

IMO Secretary General Kitack Lim has repeatedly insisted that the sulfur fuel rollout                                   must go forward as planned, despite opposition from some shipowners over the price,                      availability, compatibility and quality of compliant fuels.

The 2020 sulfur rule is expected to roil the market for middle distillates as the world's                             fleet shifts to bunkering with new, blended low sulfur fuel oils. The change will increase                              competition for diesel, kerosene and jet fuel, driving up their price, while creating an                              oversupply of high sulfur fuel oil (and a potential HFO price collapse). The White House's                           decision to back the "experience-building" rollout proposal at MEPC was driven by concern                        over the sulfur rule's expected effect on fuel prices rather than its impact on shipping.

A growing number of shipowners are contracting to install scrubbers on their vessels in order                    to capitalize on the expected price spread between HFO and LSFO in the post-2020 market.                     Scrubbers may also convey an additional advantage for vessels in tramp trades. Low sulfur                        fuel oils are a new commodity, and it is still uncertain whether a batch accepted in one port may                be chemically compatible with the next. If this fear proves accurate, and mutually-incompatible                   LSFO batches create new problems with sludge formation, the scrubber-equipped ships burning               high sulfur HFO will sail on unaffected.




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