IMO 2020

ING: Big shipping concerns as sulphur fuel cap deadline approaches

Analyses IMO 2020 and its various compliance economic and financial impacts on shipping operations.

Published

7 years ago

July 22, 2019

Admin

The following article written by Warren Patterson, Head of Commodities Strategy, ING discusses the Dutch multinational banking and financial services corporation’s perspective of IMO 2020 and its various compliance economic and financial impacts on shipping operations:

We're in the final stretch of the long-awaited International Maritime Organization shipping regulation, which will see the global shipping fleet having to move to a fuel with a maximum sulphur content of 0.5% from 2020 from the current limit of 3.5%.

The options for the shipping industry

With less than six months to implementation, the shipping industry would have largely decided on the best way to tackle this new sulphur cap. As we have mentioned in previous notes, the options are: burn a compliant fuel, install scrubbers which will allow vessels to continue using high sulphur fuel oil (HSFO), retrofit with LNG engines or not comply with the new regulation.

Compliant fuel

Suppliers have spent some time coming up with compliant 0.5% sulphur fuel oil or very low sulphur fuel oil (VLSFO), and we do think that a general industry move towards a compliant fuel remains the most likely outcome. However, this comes with its own challenges. Firstly moving to a compliant fuel is going to be costly, and the extent of this depends on whether shipowners go the route of a VLSFO or a marine gasoil (MGO), with the latter being more expensive. The key concern with VLSFO is the issue of commingling- while two fuels may be compliant and stable, they may be incompatible, leading to the potential for sediment formation. Secondly is the issue of fuel availability, with compliant fuel potentially not available at smaller bunkering ports.

Fuel availability may not be too much of an issue as we move into 2020, as stocks of compliant fuel would have been built up, ensuring enough supply at least initially. The concern may be further down the road, once stocks are reduced and the shipping industry is reliant on refinery output. But again this shouldn’t be a long-running issue, as refineries around the world make the necessary investments. Look at Russia, where years of upgrades have seen refineries there yielding larger volumes of top and middle of the barrel products, whilst residual fuel oil yields have declined. Russian fuel oil exports over the last couple of years confirm this; fuel oil exports over the first five months of this year averaged 2.5mt a month, down from an average of 3.58mt in the same time period of 2017.

Russia fuel oil exports (k tonnes)

The scrubber route

If shippers are concerned about a more expensive fuel, the other option for them is to install a scrubber, which removes the sulphur, so allowing them to use HSFO. There are issues though going this route, and regulatory risks are also growing. The spread between gasoil-HSFO clearly does give the price incentive for shipowners to go the scrubber route; the spot spread is trading at around $226/t, and when you look at the forward curve, the March 2020 spread is as wide as $300/t.

Admittedly over the last year, these spreads have been even wider, but there's clearly still an attractive incentive for ships to install scrubbers. Taking into consideration the cost of a scrubber and a spread of $300/t, the payback period for the scrubber is around one year. If the spread were to fall to around $100/t, this would see the payback period increase to around three years.

There are a number of issues with scrubbers though. Firstly with the regulation less than six months away, it is unlikely that a significant portion of the global vessel fleet will have scrubbers installed, there's just not enough time. The general consensus is that by 1 January 2020, we could see in the region of 3,000-4,000 ships with scrubbers, so only scratching the surface of the global fleet.

Secondly, there is the issue of increased yard time to install a scrubber, which means lost revenues for a shipowner, along with the fact the scrubber will also reduce the load that a ship can carry.

Finally, and probably most importantly, is the growing concern that scrubbers create their own environmental issues, with wastewater from the scrubber pumped back into the oceans. A number of ports have already banned the open-loop scrubber system, and more will likely follow. Singapore, Fujairah and China are some which have already introduced a ban on the open-loop system, which will be a concern for those who have made this particular investment. However, there are other scrubber options: ships could use the closed-loop system or a hybrid system, but admittedly this would be more expensive, and so increasing the payback period.

Gasoil – HSFO spread forward curve (US$/t)
Gasoil HSFO spread forward curve 180719 %28US per t%29

LNG switch limited

The other option is to turn to Liquified Natural Gas. However, for now, we do not believe it is a viable option; the additional expense of retrofitting a vessel with an LNG engine is too burdensome, while the lack of LNG bunkering infrastructure is another obstacle. Longer term, the case for LNG had been largely bullish. However, with the focus shifting to carbon emissions after the low sulphur cap, the industry will probably have to look at even lower carbon alternatives.

Strong compliance expected

The final choice for the shipping industry is not to comply with the regulation. This non-compliance may be intentional, while there may be a segment which has tried to unsuccessfully procure a compliant fuel, in which case they receive a waiver. We do think that compliance will be strong, with ship owners not wanting to risk fines from flag states. Furthermore, breaching the regulation would class the vessel as unseaworthy and therefore, uninsurable.

Singapore light sulphur marine gasoil bunker sales (k tonnes)
Singapore LSMGO bunker sales (kt)

When will the impact of IMO be felt?

We already see signs that the fast-approaching IMO regulation is having an effect. If we look at bunker sales in Singapore (the largest bunkering port in the world), while total bunker sales over the first six months of the year are down 6.5% YoY, sales of low sulphur marine gasoil have increased by almost 84% YoY over the same time period. Although these sales are still a fraction of the higher sulphur fuel sales, it still suggests that the industry has started to prepare to ensure compliant fuel. We believe that vessels will start to transition towards a compliant fuel over the course of the 4Q19. From a cost point of view, shipowners would want to burn HSFO through until the 31st December. However, from a practical point of view, this is very unlikely.

Strangely the regulatory change is not reflected in current forward curves as strongly as it was over the last year. We saw the spot gasoil-HSFO price spread in north-western Europe trade out to over $293/t in 2018, however it is currently trading at around $226/t. Furthermore, if we look at middle distillate cracks, they have come off from the highs of 2018, when the NW Europe spot gasoil crack broke above $20/bbl. If one expects there is going to be a significant shift from HSFO to gasoil as a result of IMO, one would expect these cracks to only strengthen further from the $14/bbl they are currently trading at. We expect these cracks will pick up over Q4, as demand picks up, sending a signal to refiners that they should maximise middle distillate yields. While HSFO cracks should start to weaken as demand falls away, for now spot HSFO cracks are well supported.

In terms of freight, we are already starting to see rates picking up; the Baltic Dry Index has rallied by a staggering 237% since February- the highest levels seen since early 2014. While a large part of this strength is attributed to a pickup in iron ore shipping activity, the other element is reportedly lower vessel availability due to ongoing scrubber installations.

Baltic Dry Index rallies

Source: ING
Published: 23 July, 2019

Ammonia

AM Green plans to build green ammonia plant at Indian port

Initiative also includes development of green ammonia handling, storage and bunkering infrastructure, pilot bunkering operations, safety procedures and training programmes, says VOC Port Authority.

Published

2 months ago

June 3, 2026

Admin

VO Chidambaranar (VOC) Port Authority on Friday (29 May) said it has signed a Memorandum of Understanding (MoU) with India’s ammonia producer AM Green Ammonia to collaborate in the development of a green ammonia production plant.

The plant will have a capacity of one million tonnes per annum (MTPA) at Tuticorin.

The initiative also includes development of green ammonia handling, storage and bunkering infrastructure, pilot bunkering operations, safety procedures and training programmes.

The project is expected to support the development of green fuel corridors connecting VOC Port with major ports in Europe and Asia, thereby strengthening India’s position in the global green fuels value chain.

VOC Port also signed a Memorandum of Understanding (MoU) with Bureau Veritas (India) Pvt. Ltd., to collaborate on Green Port certification, emissions accounting, ESG reporting, safety validation, development of green bunkering practices, and establishment of a Centre of Excellence for green fuels and sustainability.

The port also plans for an upcoming 750 m³ green methanol bunkering facility.

Photo credit: Naveed Ahmed on Unsplash
Published: 3 June, 2026

Port & Regulatory

Study: Major drop in ship sulphur emissions confirmed following IMO regulations

National Centre for Atmospheric Science study found that the average sulphur content in ship fuel dropped nearly tenfold in open ocean areas following IMO’s 2020 regulation.

Published

8 months ago

December 8, 2025

Admin

Recent global regulations have significantly reduced sulphur emissions from ships, helping to improve air quality in coastal regions – confirmed by a recent international study led by researchers at the National Centre for Atmospheric Science.

The research, published in Environmental Science: Atmospheres, used aircraft and ground-based instruments to measure sulphur dioxide and nitrogen oxides emitted by ships in the North-East Atlantic and European coastal waters between 2019 and 2023.

The team found that the average sulphur content in ship fuel dropped nearly tenfold in open ocean areas following the International Maritime Organization’s 2020 regulation, which capped sulphur content in marine fuel at 0.5%.

Before the change, many ships exceeded the previous 3.5% limit. After 2020, only a small number of ships were found to breach the new standard.

In European sulphur Emission Control Areas (SECAs), such as the English Channel and the Port of Tyne, sulphur levels were even lower – well below the stricter 0.1% limit. Interestingly, ports outside these zones, like Valencia in Spain, also showed low sulphur levels, likely due to EU rules requiring cleaner fuel when ships are docked for extended periods.

This is the first study to use aircraft-based measurements and predictions from the Ship Traffic Emission Assessment Model (STEAM3) to assess ship emissions outside of sulphur control zones since the 2020 regulation came into effect. The findings support the widely held view that ships now emit around seven times less sulphur than before the rule change – an important step toward cleaner air and healthier coastal environments.

Note: The research, titled ‘SO2 and NOx emissions from ships in North-East Atlantic waters: in situ measurements and comparison with an emission model’ can be found here.

Photo credit: shraga kopstein on Unsplash
Published: 8 December, 2025

Interview

IBIA Annual Convention 2025: ‘Exciting times’ for post IMO 2020 bunker suppliers, states Equatorial

Choong Sheen Mao, Chief Operating Officer, Equatorial, describes to Manifold Times the pre/post IMO 2020 challenges and evolution of bunker suppliers.

Published

9 months ago

October 31, 2025

Admin

The International Bunkering Industry Association (IBIA) will be hosting its flagship Annual Convention in Hong Kong at the Hong Kong Convention Exhibition & Convention Centre between 18 to 20 November 2025, as part of Hong Kong Maritime Week.

Choong Sheen Mao, Chief Operating Officer, Equatorial Marine Fuel Management Services (Equatorial), speaks to bunkering publication Manifold Times about the challenges of a post IMO 2020 bunker supplier.

MT: How does Equatorial continue to offer customer assurance and maintenance of marine fuel quality to ISO8217 standards despite increasing complexity of bunker fuel blends?

We maintain our focus to provide compliant, quality and competitively priced products to our customers. There is no shortcut. We source our products from a wide range of cargo producers and suppliers. We continue to be strict and vigilant with our testing programme for our products before delivering them to our customers. Equatorial has deepened our engagement with the wider industry to have a better and up-to-date understanding of the existing and new marine fuels.

MT: Can you share the evolution of commercial marine fuel procurement, blending and trading strategies on the back of increasing fuel types (pre/post IMO 2020)?

Pre IMO 2020, the main types of marine fuel procured and consumed by vessels were high-sulphur fuel oil, marine diesel oil and marine gas oil. Trading strategies were therefore closely linked to that within the oil industry.

However, many of the new fuel types are from other industries. For example, biofuels, methanol and ammonia are mainly products from the chemical and agriculture industries. There are marked differences between these industries and the energy industry (in particular, the marine fuels industry). LNG is from the gas industry which is distinct from the oil industry.

Without an existing liquid paper market for many of these commodities (especially as a marine fuel), the price risk management is less straightforward. Furthermore, commodity prices are no longer the sole consideration for price itself. The price of compliance must be considered. This could range from guaranteeing the origin of the marine fuel, its sulphur properties as well as its carbon intensity. The list goes on.

MT: Operational wise, what are the changing role and responsibilities of a bunker supplier to date, compared to before IMO 2020?

The role and responsibility of a bunker supplier have evolved. Fundamentally, it has been about providing quality marine fuels at competitive prices. Quantity assurance has been a critical concern which led to the mandatory implementation of the mass flow meter system for bunkering in the Port of Singapore. Interestingly, due to the nature of credit terms in the bunker industry, bunker suppliers also performed the role of “bankers” by extending favourable credit terms to shipowners and charterers.

These days, post IMO 2020, things have become even more complicated. Today, a bunker supplier retains the abovementioned roles and responsibilities, and much more – it has to ensure compliance with a plethora of rules and regulations. Compliance not only with sulphur cap requirements, but with international and regional sanctions and restrictions unrelated to the quality of the marine fuel itself. In fact, especially with alternative low- and zero-carbon marine fuels, this means compliance with standards, rules and regulations on sustainability such as the European Renewable Energy Directive and/or International Sustainability and Carbon Certification. There is also the need to comply with increasingly stringent safety regulations on both conventional and alternative marine fuels.

In addition to the above, a post IMO 2020 bunker supplier is still expected to supply compliant and quality fuel at competitive prices.

MT: Equatorial is Singapore’s largest local-born supplier; what is the next big thing for the company?

Equatorial continues to adapt and improve with the times, while maintaining its core values – Integrity, Teamwork, Commitment, Proficiency and Quality, and Safety and Environment. The bunker industry is a highly competitive one, and it is our intention to keep our competitive edge and remain relevant. This means that we have had to step out of our comfort zone and embrace the two mega trends of our time – digitalisation and decarbonisation.

We have been early adopters and developers of the electronic bunkering note as part of our own digital bunkering efforts. We have diversified our product offering to include low carbon marine fuels and are proud to be one of the pioneers for bunkering B100 biofuels earlier this year. This was made possible by the arrival of our IMO Type II chemical and oil bunker tankers. These same bunker tankers are also capable for carrying and delivering methanol. Equatorial has invested in an LNG bunkering vessel (LBV) newbuilding that is set to be delivered in Q3 2027. We are also involved in a study to develop low- or zero-carbon ammonia bunkering in Singapore.

These are exciting times.

Note: Choong Sheen Mao is amongst panellists featured in ‘Session Three: Bunker Sellers Panel’ at the IBIA Annual Convention 2025.

Join the Conversation

With over 300 delegates expected, the IBIA Annual Convention 2025 is set to be a defining moment for the marine fuels industry. Registration is now open via the IBIA Annual Convention website.