It’s one of the biggest changes for the marine shipping industry affecting human and environmental health. The International Maritime Organization (IMO) has ordered all ships to greatly lower their carbon footprint by using lower-sulfur fuels for transport. It’s believed that the effect will reduce sulfur emissions worldwide.
It may sound like a more environmentally friendly option for shipping But what else comes with this change? What does this mean for the 3PL industry?
What Is IMO 2020?
Shipping’s newest cargo ship regulation, IMO 2020—the new low-sulfur fuel requirement for shipping—has been in place since January 1, 2020. The rule affects cargo shipments worldwide, not just in the US or the EU.
The marine sector consumes about half of the world’s demand for oil and is responsible for most of the world’s sulfur emissions. Marine shippers are required to reduce these emissions by over 80 %, and will accomplish this by switching to fuels that are lower in sulfur. By doing so, the current maximum fuel oil sulfur limit of 3.5 weight percent will drop to 0.5%.
Sulfur is already considered an environmental pollutant and has long been restricted from uses such as diesel in trucks and power plant emissions.
The exception will be for ships that contain or are retrofitted with a “scrubber” that removes the sulfur from the exhaust before it’s discharged. However, these machines are expensive and will add considerable weight to a ship, and take up room that could be used for cargo. Shippers will weigh the cost of installing a “scrubber” versus changing to the new lower-sulfur fuel.
The IMO’s website lists more details, with the goal of improving both human and environmental health, particularly for areas near shipping ports and coastal areas.
The IMO points out five positive benefits from this change:
- Improved air quality with the reduction of 77% of sulfur oxide (SOx), or 8.5 million tons of it from the air
- Cleaner fuel when ships switch to higher-quality lower-sulfur oil
- Reduction of human illnesses
- Advance notice of this change allowed shippers to adapt ahead of time
- Compliance is enforced by port authorities
The new initiative (MARPOL Annex VI, regulation 14) applies to all ships worldwide.
How Will It Affect Shipping?
One obvious way shipping, in general, could be affected is overall costs. An increase in cost for shipping products from overseas manufacturing facilities into the US and other countries will likely be passed along in the form of higher prices for these goods. 3PL companies will, like other modes of transport, pass those costs along to their customers.
Companies that produce this higher-sulfur fuel will also be left with a considerable amount of a product they can no longer sell.
Ships taken out of commission to either clear them or retrofit them with scrubbers will also tighten capacity until they’re completed. Older ships that can’t be retrofitted will be taken out of commission, further limiting capacity until more fuel-efficient ships are added.
Another, less obvious possibility is the increased need for diesel, diverting it away from trucking and putting it into marine transport. Two fuel products made from diesel—vacuum gas oil (VGO) and marine gas oil (MGO)—have the potential for tightening the supply. If these products become the norm for marine shipping, truck transport may have a more difficult time getting diesel fuel. This can strain an already stretched industry that’s dealing with a shortage of both qualified drivers and qualified dispatchers.
On the flip side, advances in new tech (such as liquefied natural gas, or LNG) will increase cleaner and more efficient transportation. Reducing emissions will have long-term environmental effects, including water and air quality worldwide.
The Impact On 3PL
As marine transport goes, so does the 3PL industry.
Because 3PL is the business of getting a customer’s product from one place to another, both shipment delays and increased costs will raise prices of shipping. These costs will ultimately be passed along to the consumer in the form of higher prices for these purchased goods.
The 3PL company must also be able to plan for these anticipated delays and be able to account for them to the customer.
Additionally, freight capacity will likely be affected, and 3PLs must also account for this reduced capacity.
Once marine shipping catches up to IMO 2020, shipping may return to previous levels.
Trust 3PL Worldwide For Your Supply Chain Needs
3PL Worldwide offers a wide range of supply chain services, including air, land, and marine transport. We have warehouses in California and Connecticut and can help with all or part of your supply chain needs. Contact us today at (888) 456-1920 or use our online contact form to find out more about what we can do for your company.