Transportation Costs With 2020 Vision

31 Aug 2018; 

So far, the discussion around the implementation of IMO’s low sulphur bunker fuel mandate (“IMO 2020”) has primarily centered around the choices that shipowners have available to them.  Will they switch to low sulphur fuel oil, install scrubbers to enable them to continue to use high sulphur bunkers or explore alternative fuels like LNG?  Much less has been written about how IMO 2020 will impact marine transportation costs and who will likely pay for it.  Because there remains a lot of uncertainty around the pricing of alternative fuel options and the adoption of abatement technologies such as scrubbers, it is difficult to forecast the exact impact IMO 2020 will have on shipping costs, but based on our assumptions, we think the costs are significant and will (likely) increase transportation expenses for tanker charterers.  Because ocean transportation will remain by far the cheapest (and sometimes the only) way to move commodities over long distances, we don’t expect it to have a large impact on global transportation volumes.

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