In October 2016, the International Maritime Organization (IMO) announced a new environmental regulation starting January 1, 2020.

This regulation aims to reduce sulfur content in all marine fuels from the current 3.5% to 0.5% for ships operating outside the Emission Control Areas (ECAs). With this regulatory change quickly approaching, an update may be useful.

Check out our video below for a full breakdown of the IMO 2020 regulation changes. 

A bit of context first. In the second quarter of 2019, we introduced a Global Bunker Methodology to mirror what our steamship line carrier partners developed. This formula takes into account the cost of bunker fuel (per metric ton, based on the 100% High Sulfur Fuel Oil [HSFO]) and multiplies it by a trade factor*. The trade factor is a multiplier that easily computes the bunker cost component of a 40' container** in every trade around the world.

Expeditors' Global Ocean Bunker Formula:

Price per metric ton × Trade Factor* = 40’ Bunker Price**

We track daily spot prices with Bunkerworld and Ship & Bunker for three representative fuel types that play a role in determining the cost impact of IMO 2020:

1) HSFO - High Sulfur Fuel Oil with 3.5%S: Allowed use on board vessels until January 1, 2020, unless the vessel is outfitted with an exhaust gas cleaning system (or "scrubber");

2) VLSFO - Very Low Sulfur Fuel Oil with 0.5%S: Required use on board vessels beginning January 1, 2020, unless the vessel is outfitted with a scrubber; and

3) ULSFO: - Ultra Low Sulfur Fuel Oil with 0.1%S: Currently used on board vessels to power generators that provide electric power to many shipboard systems, ULSFO is used when a vessel enters into an ECA. Current ECAs include US Territorial Waters and European Union Territorial Waters.

The key update: In order to meet the IMO 2020 regulation, we will replace the 100% HSFO cost basis with 100% VLSFO starting on January 1, 2020. To find out more, please contact your local Expeditors representative.

*List of trade factors available upon request.

**LCL & other container size formulas available upon request.