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The shipping industry, oil refiners and commodity traders will all be impacted by the new IMO sulphur emission regulations that came into effect in 2020. 
  • Stronger controls on the level of sulphur in vessel exhaust gases are now into effect since 1 January 2020. These controls could add $40bn to the fuel bill of the world’s merchant fleet, putting more pressure on an industry already struggling with excess capacity.

  • The new regulations appear to have strong momentum and backing from the major flag states, the European Union (EU) and United States (US), but it is not yet clear how they will be enforced, especially in international waters.

  • The whole fuels supply chain will be impacted, requiring refiners and traders to decide what types of fuel to supply, and shipping companies to decide what types of fuel to burn and how fast to switch.

  • Each industry sector along the supply chain has a different perspective on how best to respond to the regulations, the willingness to commit investment is limited until the other parties reveal their hands.

  • Securing the best outcome for all parties will require more coordination and commitment across industry sectors than has happened to date. Without momentum behind cross-industry solutions, there is a high risk that the transition to the new regulations will be volatile for all; mostly to the detriment of the merchant fleet, and potentially a missed opportunity for refineries.

  • Careful planning and engagement is required to ensure that companies do not over-invest to secure fuel supplies/ramp up production too early, or leave it too late to avoid being held to ransom or suffer from shortages / missed opportunities down the line.