On Day One of the Intermodal Europe 2019 in Hamburg, Germany, Stefan Verberckmoes of Alphaliner gave an insightful presentation on the effects the IMO 2020 Sulphur cap will soon have on liner shipping. Verberckmoes is an editor and analyst for Alphaliner, a leading online provider of information and in-depth analysis for the liner shipping industry.

In his presentation, he discussed the 3 main options vessel owners can choose from to attain compliance with the IMO 2020 regulations. These options comprise of: (1) the installation of Scrubbers, (2) the usage of LNG, and (3) Very Low Sulphur Fuel Oil (VLSFO).

Inspired by this presentation, this article intends to give you a full overview of the IMO 2020 and what it could mean for your business. But before we get into detail on the solutions, let’s take a quick look at the IMO 2020 itself…

What is IMO 2020 regulation and who does it apply to?

Starting on the 1st of January 2020, all seagoing vessels must reduce Sulphur oxide gas emissions by 85%. The maximum Sulphur content of marine fuels which vessels can use will be limited to 0.5% from the 3.5% that it is currently at. For the dedicated Environmental Control Areas (ECA) in parts of Northern Europe, North America and Asia, the already cleaner fuel must be even further reduced to a 0.01% Sulphur content. The International Maritime Organization is putting this new regulation in place globally with the aim to protect public health and support the environment.

IMO 2020 will affect vessel operators, refineries, and global oil markets. The Port State Control of the respective states will be responsible for controlling the vessels by checking logbooks using sniffer devices and sniffer drones. Subject to the jurisdiction, the penalties include high fines, ship arrest or even imprisonment of the captain.

In which ways can vessel operators comply with the IMO 2020 regulation?

Vessel operators have, at present, 3 viable options to choose from in order to comply with the new IMO 2020 Sulphur limits. The following sections explain each of these technologies as compares them on the basis of their limitations and/or disadvantages to vessel operators.


Scrubbers are exhaust gas cleaning systems which remove pollutants from the ship’s exhaust, allowing them to continue using higher-Sulphur fuels. This done by pumping water through the engine’s funnel, so the Sulphur and other particles are “washed out”. There are two basic types of Scrubbers; the ones which work in an open system by pumping seawater through the funnel of the vessel, and those which work in a closed system and keep the “washout” on board the ship. “About 2,000 to 2,500 installations will be completed by the end of the year”, said Donald Gregory, director of the Exhaust Gas Cleaning Systems Association (EGCS). Out of that amount, 10% will be retrofits on cruise ships. Further, at least 200 large container vessels are predicted to become equipped with Scrubbers in the coming months.


The process of installing Scrubbers is limited and expensive due to space and capacity constraints and will inevitably increase operating costs. Another consideration is that the price and availability of higher Sulphur fuels after 2020 is uncertain.

Furthermore, Scrubbers are a non-proven interims technology. The impact of Scrubbers on the environment, ports and coastal waters is debated with controversy. There are big issues concerning the subsequent handling and disposal of the washing water that contains the particles. Due to the size and power of the main engines of larger container vessels, the handling of the washout may vary. Several countries, including Singapore and China, have established strict rules for the use of the Open Loop Scrubbers and for the treatment of the washed product as toxic waste, making the use of this technology even more expensive. Furthermore, they have banned Open Loop Scrubbers in inland port waters and coastal shipping ECAs since the environmental effects are questionable.

Switching to non-petroleum-based fuels

Vessel operators can switch to non-petroleum-based fuels, such as Liquefied Natural Gas (LNG) for propulsion. This is feasible for newer vessels with compatible specifications. Current knowledge indicates that the use of Liquefied Natural Gas (LNG) is preferable against Scrubbers for the purpose of Sulphur reduction.


The infrastructure to support the use of LNG is currently limited in scope and availability.

Switching to a Very Low Sulphur Fuel (VLSF) or MGO

Vessel operators can switch to a Very Low Sulphur Fuel (VLSF) or MGO that complies with the new rules. This will be the most likely choice.


The cost, widespread availability and specifications of a new fuel for use in marine engines are still uncertain. The petroleum industry needs to adapt refineries and supply chains and is highly likely to pass these costs on to the market.

So which is the best alternative?

After weighing the options, the majority of carriers will use VLSF / MGO to meet legal requirements. While LNG technology is still in its early stages Scrubbers serve as a second temporary solution. Alphaliner has revealed a strong increase in Scrubbers installation since June 2019. They report that 153 ships were equipped with a Scrubber at the end of October, and this number is expected to increase to 260 vessels by the 1st of January, 2020. This represents a total capacity of 2.3 MTEU, which is about 10% of the total container fleet capacity. Experts predict that by 2020 approximately 250-500 vessels, or a maximum of 10-12% of the global container fleet, will either be equipped with pollution cleaning technology (Scrubbers) or will be able to burn LNG [Source Clarksons Research – June 2019].

Expect Freight Rate Increases

The inevitable increase in costs is expected to have a significant impact on the overall prices of container transportation and on freight rates. Freight rates are already expected to increase before the end of 2019. Consequently, long-term agreements for both full and part load containers will include a Bunker Adjustment Factor (BAF)- a price adjustment method.

While it’s too early to see an impact on the freight market now, because most of the work is yet to be done, rates are nonetheless likely to rise when the installations ramp up and vessels go off-hire,” said Jonathan Chappell, an analyst focusing on marine transportation equities at Evercore ISI.

Furthermore, there is a risk that by 1 January 2020 there won’t be enough IMO 2020 compliant fuels available in the geographical areas where the fuel is demanded. This shortage will further increase prices, temporarily at the very least.

Expect Delays

Another key consideration is the quality control surrounding this new fuel. If fuels are blended sub standardly, sediment will form and possibly lead to a breakdown of the main engine. Therefore, it is critical that the fuel meets a high degree of quality and compliance standards. Hence, transport services may be disrupted due to substandard fuel quality or insufficient availability of compliant bunker fuels when IMO 2020 commences.

Schedule delays may occur due to the aforementioned lack of availability or due to slower steaming in order to recover the costs for the more expensive IMO 2020 compliant fuel. If the tonnage has to be reduced for technical changes, as for example, the installation of a Scrubber, there will be a minor impact on available transport capacity as well.

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To sum up, we can expect that the beginning of this transition will be a bit messy. There are no cheap or free alternatives when it comes to achieving compliance with the 2020 Sulphur cap. Scrubbers, however, do seem to be the favored option for large ships. We can assume freight rates will increase overall, though exact price increases still can’t be forecasted at this point. To save on shipping, freight forwarders should consider the use of SOC containers. While freight rates go up, savings can be made on demurrage and detention. They can also increase flexibility as well as get pick-up credits. And to maximize fuel efficiency, avoiding empty container repositioning is vital.