IMO 2022 NORMATIVE

Since 1 January 2020 new regulations from the International Maritime Organization have required the global limit for sulphur content in fuels to be reduced to 0.5%, compared to the maximum of 3.5% or 1.5%, depending on the geographical area, which has been permitted up to now. ARMAS TRASMEDITERRÁNEA GROUP strongly supports the new agreements reached by the IMO (International Maritime Organization) to reduce polluting gases. We believe that, despite the fact that maritime transport is the least polluting mode of transport in terms of tonnes per mile, we must continue to move towards making zero environmental impact because the efforts of everyone are needed to solve the problem.

This initiative fits perfectly within our Group’s commitment to sustainability.

INTERNATIONAL MARITIME ORGANIZATION

This initiative fits perfectly within our Group’s commitment to sustainability.

For example, in 2019 we began a programme to remove plastics from our ships and we are working to clean the seas of plastic.

from 1 January 2020 we have reduced the sulphur content in our fuels by 85%

SCRUBBERS

EXHAUST GAS CLEANING EQUIPMENT

Scrubbers are a technology which is little used, is expensive, requires technically complex installation, and has long lead times. Moreover, open cycle scrubbers (which dump the product created after cleaning gases into the sea) are accepted by the IMO, but there are ports and states which restrict them. It seems to be a solution for high consumption vessels with along useful life, to allow the investment to pay off.

VLSFO

VERY LOW SULPHUR FUEL OIL

Although there are fuels low in sulphur in SECA zones, there is no 0.5% VLSFO available on the market today, so the potential difference in between this and high sulphur Fuel Oil is unknown.

ARMAS TRASMEDITERRANEA GROUP envisions the installation of hybrid scrubbers which do not dump the product produced after cleaning into the sea, before and during 202 on several ships, which others will use VLSFO or Diesel.

CURRENT SITUATION

EFFECT ON PRICES

The introduction of a sulphur limit will lead to additional operating costs for shipping companies, either through the installation of scrubbers or by switching to higher cost fuels.

ARMAS TRASMEDITERRÁNEA GROUP strongly supports the new agreements reached by the IMO (International Maritime Organization) to reduce polluting gases. We believe that, despite the fact that maritime transport is the least polluting mode of transport in terms of tonnes per mile, we must continue to move towards making zero environmental impact because the efforts of everyone are needed to solve the problem.

However, it will be impossible not to pass on at least some of these price increases to the customer, and we also understand caring for the environment to be the responsibility of everyone, so the contribution of the end customer is necessary too.

WHEN WILL WE KNOW MORE?

The lack of data about the price and availability of VLSFO has, until now, not allowed us to calculate the cost that the change in regulations will have.

During October we will inform you personally how we are tackling the change in fuel and its economic repercussions.

SULPHUR EMISSIONS

IMPORTANT INFORMATION ON THE NEW SULPHUR EMISSIONS REGULATIONS

In line with our commitment to keep you informed on changes related to this topic, we are providing you with the latest updates.

- Some of the leading oil tankers in the marine bunkering sector have informed us of their intention to cease supply of high sulphur Fuel Oil (3.5% S) from the 15 November.

- Our technical department expects to stop fuelling with this fuel on 1 December, The reason is that from 1 January 2020, fuel with a sulphur content higher than 0.5% must not be used by vessels. The Maritime Authorities can take fuel samples from all ships and will detain and sanction those vessels that do not comply with these regulations. As the fuel systems on board the vessels are of enormous capacity and highly complex, it is estimated that a period on one month of functioning with low sulphur fuels is necessary to clean the tanks, pipes, pumps, and other fuel processing equipment of any trace of high sulphur fuel before the established date.

- In addition, due to the lack of a reliable price for VLSFO, the main oil tankers are giving prices referenced to diesel, so the increase in price compared to that of 3.5% sulphur fuel will be more than 40%.

We are working with this information, and hope to be able to indicate the conditions which will apply in 2020 in the next few days.

From 1 January 2020 we have reduced the sulphur content in our fuels by 85%

VESSEL FUEL

NEW REFERENCE FOR THE CALCULATION OF BAF

With the entry into force of the IMO 2020 regulation, a large part of the world fleet will stop using high sulphur fuel oil and will switch to cleaner fuels, such as VLSFO (Very Low sulphur Fuel Oil) or MGO (Marine Gas Oil). Armas-Trasmediterranea group will employ different solutions to adapt to the regulations, using one or another types of fuel on different ships and routes.

There is no price history for VLSFO, and all suppliers indicate that its price will be strongly linked to that of diesel. To simplify the application of BAF adjustments, from 1 January 2020, the MGO will be used as a reference.  In addition, in order to compensate for possible volatility in the market for this product, the BAF will be updated in the event of substantial changes in the price of MGO.

JUNE 2022 UPDATE

MORE MEASURES ADOPTED TO REDUCE THE EMISSION OF GREENHOUSE GASES

The IMO adopts compulsory essential measures to reduce the carbon intensity of vessels and establish a vessel classification system.

The International Maritime Organization (IMO) has adopted new mandatory measures to reduce the carbon intensity of international shipping, putting the sector on track to meet the greenhouse gas (GHG) reduction targets set out in the IMO's 2018 Initial Strategy to reduce GHG emissions from ships.

The IMO's Marine Environment Protection Committee (MEPC 76), meeting remotely from 10-17 June 2021, adopted amendments to Annex VI of the International Convention for the Prevention of Pollution from Ships (MARPOL Convention) that will require ships to reduce their greenhouse gas emissions. These amendments combine technical and operative focuses to improve the energy efficiency of vessels, also providing important elements for future measures to reduce GHG emissions.

The new measures require all vessels to calculate their energy efficiency index applicable to existing vessels (EEXI) and establish their annual carbon intensity indicator (CII) as well as their CII classification. Carbon intensity relates GHG emissions with the quantity of cargo transported and the distance covered.

The vessels will obtain a classification of their energy efficiency (A, B, C, D, E - where A is the best). Administrations, port authorities and other stakeholders, as appropriate, are encouraged to provide incentives to A or B class ships, sending a clear signal to the market and the financial sector.

The amendments to MARPOL Annex VI (adopted in a revised consolidated Annex VI) are scheduled to enter into force on 1 November 2022, and the requirements for EEXI and CII certification are scheduled to enter into force from 1 January 2023. This means that the first annual report will be completed in 2023 and the first classification will be given in 2024.

A review clause requires IMO to review the effectiveness of the implementation of the IIC and EEXI requirements by 1 January 2026 and, if necessary, to develop and adopt further amendments.