The European Shippers Council (ESC) expressed concern Monday about potential harm to several industries from new limits on the sulfur content of fuel used by ships in the Baltic and North seas and English Channel that are scheduled to come into effect Jan. 1, 2015.
Citing a report by the Stockholm engineering firm Sweco, ESC said the change will have "a huge impact on both
European and national transport patterns with negative consequences
including: the impact upon the environment; unmet diesel demand;
maritime transport suffering tremendous cost increases; and, with a
knock-on effect, causing unsustainably fierce road transport
"Saw mills, pulp and paper, steel, mining and
chemical industries will be amongst those transport buyers hardest hit
by increases in transportation costs. These industries are dependent on
high-volume transportation and global competition gives no opportunity
to compensate by increasing prices," ESC said.
The limit on sulfur content in fuel will drop from 1 percent to 0.1 percent in the European Emission Control Area (ECA) as well as in the North America ECA, which includes an area that extends 200 miles from the coast line of the United States and Canada.
The gloomy ESC statement was interesting in light of a press release it put out in May that was headlined "EU takes off sharp edges Sulphur Directive,"
and praised the institutions of the European Union for not following the parliament’s
wish to introduce the 0.1 percent sulfur emission limit in Southern European
Last month, the Council of the European Union said instead the sulfur limit in European waters would drop from 1.5 percent to 0.5 percent in 2020.
In Monday's press release ESC said " shippers, and the wider business community, are not opposed to harder sulfur rules at sea but higher transportation costs threaten several important industries and will lead to job-losses. The European Commission must now ensure the unintended consequences of regulating the transport market are limited."
ESC said to conform with these regulations ship operators only have three solutions: use scrubbers to remove sulfur from exhaust, use cleaner natural gas as fuel, or use diesel fuel. But it said there are problems with all these approaches saying scrubbers are not yet commercially available, there is shortage of infrastructure to use liquefied natural gas, and use of diesel fuel will "dramatically increase short-sea shipping prices and cause a loss of competitiveness."
It asked EU member states to "consider very quickly certain possible exemptions which could be inserted into the Marpol Annex 6 revision, enabling European short-sea traffic sufficient time to become compliant at a reasonable price."
The Sweco report estimates the price difference between 0.1 percent and 1 percent sulphur fuel will be over $350 per ton in 2015, which it said would push up the price of diesel fuel. The result, it said, would be that a trend in a higher share of new diesel car registrations "will be broken when the price of diesel overtakes the price of gasoline in 2015."
"Organizations with no clear customer and limited ability to pass on price increases to end consumers will be more deeply affected by diesel price increases," Sweco said. "Examples are public transporters, municipalities and governmental organizations. Sectors that are very exposed to global markets must find a way to reduce costs or adapt their business – examples are agriculture, steel, pulp and paper and wood industry."
The engineering firm said installation of scrubbers would represent additional costs for shipping companies even if the price spread between 0.1 percent and 1 percent sulfur fuel is high. Noting that shipboard scrubber technology is "new and therefore surrounded with risk," it said it expected no more than 2.5 percent of all ships operating daily in ECAs would have scrubbers by 2015. - Chris Dupin