Leading freight and logistics player, Expolanka PLC, a unit of Japan’s SG Holdings says regulations on ship emissions that are set to come into effect from next year will add to cargo transport costs.
The International Maritime Organization (IMO), a specialized agency of the United Nations for regulating the shipping industry, is expected to enforce new regulations on emissions standards for ships from January 1, 2020, which are intended at cutting high sulfur emissions that pollute the environment.
As a result, ships employed in both cargo and passenger transport world over will have to switch from high-sulfur to low-sulfur marine fuel within less than six months, which will have massive implications to a gamut of industries including oil, shipping, freight and logistics and insurance.
“Air and sea freight will continue to face challenges in the new financial year. In addition, new regulations on ship emissions that are pending for 2020 will add to cargo transport costs, on top of volatility in oil prices,” Expolanka PLC Group CEO Hanif Yusoof told shareholders in the company’s latest annual report.
The IMO is set to ban ships using fuel with sulfur content higher than 0.5 percent from next year, compared to current levels of 3.5 percent. The most commonly used marine fuel is said to have a sulfur content of around 2.7 percent.
Over 170 countries including the US have agreed to comply with the new regulations, and ships violating the new rules risk being impounded.
A Reuters news report estimated that the container industry is likely to be among the hardest hit with additional costs of approximately US $ 10 billion.
Meanwhile, while acknowledging the possible negative implications of trade tensions between the US and China on global trade, Yusoof said Expolanka’s geographical diversification will allow the firm to take advantage of the possible shifting in manufacturing by certain countries.
“However, the tangible effects of these shifts may take years to witness. In all probability, we may observe more regionalisation with products being manufactured closer to the end market opening up opportunities for regional and domestic logistics services,” he added.