Question

Will the International Maritime Organization (IMO) regulations which require ocean carriers to use cleaner diesel fuels increase or decrease a carrier’s incentives to slow-steam?  Why?

Answer 1

Answer:

The International Maritime Organization (IMO) regulations which requires ocean carriers to use cleaner fuels (with lower sulfur content 0.5%m/m) decreases a carrier’s incentives to slow-steam and the reasons are:

· Availability of LNG (cleaner fuel) will add challenges and costs to slow-steamers

Ocean carriers are resorting to using of Liquified Natural Gas (LNG) in order to reduce harmful emissions and meet the regulations of IMO. However, LNG is hard to get and as a result, large number of ports will have to be made for refueling the engines. Hence, it will delay the shipments of cargo as time will be consumerd in re-fuelling of tank and this will make a huge loss to the carriers who are following slow-steaming.

It is true that (LNG) is a clean fuel and reduces CO2 emission but LNG weighs more in terms of volume when compared to bunker oil. Hence, the longer will be the journey, the larger amount of storage space will be required to save the fuel. So, more construction work will have to be done using insulation, steel works, making superstructures etc. to make storage space for LNG and the amount of cargo carried in each ship will decrease due to that storage space. Indeed, it will further reduce the speed of slow-steaming ships. Hence, less income will be generated by each ship due to use of LNG.

· Nullifying the incentives from slow-steaming due to additional costs incurred in removing sulfur content from fuels

Carriers to meet with the new regulations of IMO to use cleaner fuels are removing sulfur contents from the bunker fuel which they are using presently. But this process costs them some amount thereby reducing the profits made by slow-steaming.

· Construction of on-shore power supply on ships will render ships heavier and further slower the ships down

The slow-steamers use to sail slow in order to safe some fuel and power, but after installation of on-shore power supply to be environment friendly, the slow-steamers have become slower due to increased bulkiness of ships. Hence the carrier’s incentives to slow-steam has been decreased as the deliveries will get late and the payment to the carriers will be negatively impacted.

· Cost addition to owners following slow-steaming and having large fleet of ships

The carriers which generally slow-steamed had initially deployed more ships in order to keep up with their service commitments hence, bigger the fleet of the ship, bigger will be the cost the owner will have to bear, as more number of mechanical devices will have to be installed in all the ships in order to clean the exhaust gas so as to meet the emission requirements.

· Cost addition due to installation of scrubbers and air-filters

The carriers used slow-steam in order to save fuel and power consumption, but now there is an additional cost of installing scrubbers and other mechanical devices which are supposed to remove the sulfur content and filter the exhaust gas before emitting in the atmosphere. This cost addition will reduce the profits made from slow-steaming, though it will be a onetime cost.