Sulphur cap pressures local shipping firms

16-Nov-2019 Intellasia | The Saigon Times | 6:02 AM Print This Post

The 2020 Global Sulphur Cap, a regulation set by the International Maritime Organisation (IMO), which will go into force in early 2020, will drive up management and operation costs due to soaring fuel prices.

Under the global sulphur cap regulation on marine fuels, ships will have to use fuel with a maximum sulphur content of 0.5%, down from the current 3.5%, unless they are equipped with scrubbers to remove the sulphur from the vessel’s emissions. The regulation is aimed at limiting sulphur emissions.

Speaking at a conference on the future of Vietnam’s maritime sector in HCM City on November 13, Simon Neo, executive director of SDE International, noted that the sulphur cap will challenge shipping firms, especially small firms or those with weak financial capacity.

Based on Neo’s calculation, if the new global regulation mandating low-sulphur marine fuels is applied to the domestic shipping fleet, the operating costs of ships are likely to jump by 50%.

Many experts said that the 2020 global sulphur cap will create many significant changes in the shipping industry, pushing up the costs of operating and managing ships as the price of fuel with a maximum sulphur content of 0.5 percent is high.

As such, many major shipbuilders in Japan, the European Union and the United States are seeking ways to use liquefied fuel to reduce costs, presenting an opportunity for Vietnam to learn from these global players while relying on imports of cleaner fuels in the coming months, heard attendees at the conference.

Chris Chatterton, chief operating officer of Methanol Institute, stated that Methanol can meet both the sulphur cap regulation and the carbon emission reduction target set by the IMO.

Renewable methanol can act as a long-term transition fuel, which may power fuel cells, a type of fuel deemed one of the most feasible solutions for lowering carbon emissions in the shipping industry in the future.

Apart from the burden imposed by the sulphur cap, Vietnamese ship owners are facing other difficulties, including managing outdated shipping fleets and having limited access to capital, despite the high potential of the local maritime sector.

Speaking of the status of shipping fleets in Vietnam, Bui Van Trung, secretary general of the Vietnam Ship Owners’ Association remarked that Vietnam’s shipping fleet consists mainly of old and outdated ships, many of which are 15 years old or older, putting local ship owners and the country at a disadvantage amid fierce competition with newer ships owned by foreign rivals.

Besides this, domestic shipping firms, mainly those operating on a small scale with low profitability, have had difficulty mobilising capital to modernise and improve their shipping fleets. The shortage of skilled employees has also hampered their growth. Yeow Hui Leng, group project director of Asia Pacific Maritime, said Vietnam has developed significantly over the past three decades despite economic headwinds and global uncertainties. This rapid economic growth has driven up the shipping demand. However, the country needs to overcome the challenges related to modernisation and strict maritime regulations, she stressed.

The Vietnamese shipping sector is growing steadily, with 81 million tonnes of cargo transported by the country’s fleet in the first half of 2019, a year-on-year increase of 16%.

Statistics from the Vietnam Maritime Administration indicated that between January and June, the country’s seaports handled 308.8 million tonnes of goods, up 13 percent year-on-year.


Category: Economy, Vietnam

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