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Lower sulfur limits: Panalpina actively helping customers deal with supply chain impact

News   •   Jan 17, 2019 18:15 CET

Roughly 90 percent of world trade is by sea and sulfur-rich fuel powers the merchant fleet of about 95,000 vessels, including container ships. (Photo by Fancy Crave on Unsplash)

With new rules on ship emissions coming into force in 2020, Panalpina is proactively supporting customers to deal with increased costs and potential supply chain disruptions.

Already this year, cargo owners will feel the impact of new rules on ship emissions that are coming into force on January 1, 2020. Panalpina is ready to support ocean freight customers in dealing with higher costs and potential disruptions as a result of the lower sulfur limits.

From 2020, the sulfur content of bunker fuels will be reduced to 0.5 percent, compared to 3.5 percent now in most parts of the world. The new regulation, introduced in October 2016 by the U.N. International Maritime Organization (IMO), aims to protect the environment and human health.

Global supply chains and cargo owners affected

Increased costs will apply, as a result of higher demand for low-sulfur fuel or installing “scrubbers”, systems that clean exhaust gases. Carriers will pass these costs on to cargo owners.

The regulation effectively bans ships from emitting sulfur content higher than 0.5 percent. Disruptions could result from ships being fined or denied port calls. There might be delays in the supply of more environmentally-friendly fuel types and as ships are retrofitted with scrubbers.

Directly related cost increases are expected to spike in the second half of 2019. In addition, some countries have already introduced the new sulfur cap ahead of the deadline. China, Hong Kong and Taiwan have implemented a 0.5 sulfur limit from January 2019. In addition, China will impose an even stricter sulfur cap of 0.1 percent from January 2020, the same as in Europe and North America where the 0.1 percent limit already applies.

“Panalpina is on the case, actively providing customers with advice and information,” says Joerg Twachtmann, Panalpina’s global head of Ocean Freight FCL. “In particular, we are monitoring ocean freight market and price developments, and developing a transparent and competitive pricing mechanism to pass through increased costs from carriers to cargo owners.”

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