Shipowners facing the possibility of 50% fuel price increase

Because of the international nature of the shipping industry, it had long been organized that action to improve safety in maritime operations would be more effective if carried out at an international level rather than by individual countries acting unilaterally and without coordinating with others. Based on this principle, The International Maritime Organization (IMO) as a United Nations body - has approved rules to reduce harmful emissions from ships, by banning vessels from using their traditional heavy fuel in many parts of the world. This could prompt a rise of as much as 50% in fuel cost for shipowners.


The oil currently used by ships is known as bunker, which is the residue left after higher-quality products are refined out of crude oil and is far cheaper than other fuels.

The Marine Environment Protection Committee (MEPC) of the International Maritime Organization (IMO) - according to Finfacts Business said last week that the main changes would see a progressive reduction in sulphur oxide (SOx) emissions from ships, with the global sulphur cap reduced initially to 3.50% from the current 4.50%, effective from 1 January 2012; then progressively to 0.50 %, effective from 1 January 2020, subject to a feasibility review to be completed no later than 2018.

The rules are expected to be adopted formally by the IMO committee at its next meeting in October and come into force 16 months after that. The rules will be obligatory for ships flying the flags of IMO member countries – the vast majority of international shipping.

According to estimates, about 45% of the orders booked in the shipyards currently are for dry bulk carriers. The Baltic Dry Index, the benchmark for freight rates for bulk carriers, hit an all-time high of 11,039 on November 13, 2007, up from 2,438 on January 3rd in 2006