Regulatory changes and IMO 2020
Michael Hynekamp EVP and COO WW Ocean
Roger Strevens VP, Global Sustainability
7 November 2018
Lean:Green sustainability strategy
Core contention: what's sustainable and what's economic can and must be the same thing
To pursue Lean:Green is to be a leader
- Engaging with innovators to find new Lean:Green solutions
- Advocacy is vital in making sustainability the norm
The big five… of the moment
GHG regulatory developments
- At least 50% absolute reduction by 2050 vs. 2008
- Deceptively urgent
- Focus areas for regulatory development include:
- Port scheduling optimisation likely first order of business
- Vessel speed reduction many ripple effects
- Regulatory changes not expected before 2020
Wallenius Wilhelmsen's GHG approach
Engaging for a zero emission future
Partner to find Lean:Green solutions
Attract innovators to shipping
Engage in the regulatory process
6
Vessel Recycling
○ Wide range in recycling performance
- Worst: horrific welfare and environmental consequences
- WalWil: responsible recycling of vessels for many years
- Transparency key to progress; enables informed decision-making
- Ship Recycling Transparency Initiative (SRTI) – launching end Nov.
- Online platform for disclosure of recycling policies & practices
- 'Obligation' for investors and customers to respond
What | Fuel sulphur content drops to 0.5%, or equivalent. ECAs stay at 0.1%
When | January 1 st 2020 – deferral not possible
Who | Applicable to all vessels, all of the time
Enforcement | 'Carriage Ban' adopted - signals IMO's commitment, important tool
Wallenius Wilhelmsen has chosen a balanced approach which gives the best chance of managing risks and costs
Increased bunker costs to be transferred to the customers…
- The cost of compliance with the regulation will be linked to the new fuel most vessels will switch to
- The cost will have to be passed on to the customers using the same mechanism as today's BAF clauses
- The new regulation will simply mean a different price for compliant marine fuel for most vessels
- BAF clauses will change on Jan 1 2020 and will feature a different reference fuel from that point on
… and implementation well under way in Wallenius Wilhelmsen
- Since the finalisation of the regulation, the group has been direct and open in communication with our customers that:
- This change is coming
- We agree with and support the change
- The increased cost must be passed on in full
- The majority of contracts that extend into 2020 (now carry new clauses that provide a basis to adjust contracts and terms to reflect the new IMO regulation
- For contracts running into 2020 with any gap to provisions to adjust BAF, the group will implement emergency fuel surcharge
- Discussions are ongoing or will run in parallel with tenders for contracts that expire before 2020 to introduce new BAF
- Tariff BAF will also be adjusted to point to such a new public market index
Wallenius Wilhelmsen will have 25 vessels with scrubbers by end of 2021
Conclusion
Cost is unprecedented and cannot be absorbed
The increased bunker cost will be passed on the (end-) customers through BAFs
Wallenius Wilhelmsen has and will continue to prepare customers for the cost increase this regulation will have on their business
A balanced approach gives the best chance of managing risks and costs