Covid-19 pandemic clouding the impact of sulphur 2020 compliance

The extent to which the international shipping industry is managing compliance with what only a few months ago was seen as likely to be the biggest story for shipping this year – the introduction of the International Maritime Organization’s rules on sulphur levels in ship fuel. The use of 0.50% oil (absent scrubbers being installed on a vessel) was banned from the beginning of the year, and the carrying of High Sulphur Fuel Oil was banned two months later.

Beth Bradley, Partner at maritime law specialist Hill Dickinson has written that It will be difficult to ascertain a full picture of how well the international shipping industry is complying with Regulation 14.1.13 of Marpol Annex VI, to give the January 1st law its full name.

Bradley said that “while a few issues arose concerning the quality of the low sulphur fuel, particularly some blended fuels having a propensity to sediment, and around marginal breaches of the cap, the implementation of the global sulphur cap was progressing smoothly with reports of high levels of compliance.”

However, she added that the disruption to international shipping caused by Covid-19 had “pushed sulphur cap issues well and truly from the headlines”.

The regulation remains in force, but port authorities globally were prioritizing health and the movement of freight, which meant that enforcement action would perhaps “be less of a priority”.

The impact of the pandemic had also led to serious delays to existing orders for the retro-fitting of exhaust gas cleaning systems (EGCS aka “scrubbers”), particularly for those vessels where the work was to take place in Chinese shipyards, or to cancellations as owners and operators sought to cut costs.

Bradley also noted that the recent collapse in the oil price had eroded the price differential between high sulphur and low sulphur fuel oil (in absolute if not in percentage terms), “making the immediate prospect of a larger uptake of exhaust gas cleaning systems doubtful, particularly if prices remain low for a significant period of time”.

The UK’s Maritime and Coastguard Agency (MCA) recently announced that it was suspending vessel checks for compliance with low sulphur fuel regulations in order to keep freight moving, although it made clear that it would still inspect vessels where information is received indicating that an inspection would be appropriate. Bradley said that this was “unlikely to be the last such announcement”.

Ms Bradley concluded that “while the sulphur cap and the carriage ban remain in force such that owners risk enforcement action if they carry marine fuel with a sulphur content in excess of 0.50% m/m for use on board, the disruption caused by Covid-19 may reduce that risk where port state control is under pressure on other fronts. It also will make it difficult to ascertain a full picture relating to compliance and enforcement until sometime after the pandemic has receded.”