How Emission Control Areas Effect Your Ocean Transport Costs

What is an ECA?
Emission control areas (ECA's) or Sulfur Emission Control Areas (SECA's) are zones designated by MARPOL – the International Convention for the Prevention of Pollution from Ships. MARPOL is a marine environmental convention with a goal to reduce sea pollution specifically focused on dumping and oil/exhaust pollutants.   

Vessels operating within an ECA zone must use a marine fuel (or bunker) with a sulfur content that does exceed 0.1% or use an exhaust gas cleaning system, commonly known as scrubbers.  

(Photo courtesy of International Maritime Organization)

HFO vs. MGO
Traditional vessel fuel (bunker) is known as Heavy Fuel Oil (HFO) and can't be used in the ECA zones due to its high sulfur content. A low-sulfer bunker is required in the ECA zones such as Marine Gas Oil (MGO) and with the implementation of North American ECA zones in 2015, the demand for MGO has increased.  In addition, MGO is more expensive than the traditional HFO. Simple economics shows us that as demand increases, the supply could be become limited which could drive a cost increases.

Tough Decisions
Steamship lines and vessel owners have several options regarding the ECA zones and the increased bunker costs. Several factors need to be carefully examined prior to making a decision on how their organization will manuever the ECA zones.  Some options include:
•    Install scrubbers and avoid using MGO fuel – although scrubbers are a relatively new technology, they do take up space that could be used for cargo, installation will take time when the vessel won't be in operation and the reliability of this equipment hasn't been tested on a long-term basis.
•    Changing to MGO or a low-sulfur fuel prior to entering an ECA zone – this option comes with a myriad of issues as well.  This means that the vessel has to secure 2 types of fuel onboard with comes with its own legal and safety regulations. In addition, there will be 2 types of fuel being used in the vessel engine which will require additional maintenance and possibly issues with specific engine parts.
•    If the vessel is using an MGO fuel or similar, the crew will need to ensure enough is stored onboard for the voyage or there is availability at their port stops due to high demand. 

And What About My Ocean Freight Costs?
Good news for those that anticipated increased ocean freight costs due to high MGO costs – there was no rise during the first half of 2015.  Industry experts and transportation professionals alike agreed that a price hike was likely due to the implementation of the ECA zones in North America and the MGO costs, however, this has proved incorrect. Decreasing HFO bunker costs are widely believed to be the driver that have equalized the higher MGO expenses.

About Allyn International
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