It’s always interesting to note when a market suddenly wakes up to an impending shift that those close to that market—like journalists—may have seen coming for some time. That appears to be the case in the last few weeks with IMO 2020. It’s a complicated rule, but in short it will require ocean-going vessels to burn fuel with a much lower sulfur content than they have been burning for years. There are times when you could find bunker fuel—the name of the fuel that powers ships—with sulfur content of 5%. The more recent limit is 3.5%. (And the dirty little secret about bunker fuel is you never knew what else might be in it.) But under the new rule that goes into effect in 2020, the limit is 0.5%, and it’s very hard to produce bunker fuel that meets that specification. So that means it will be mostly replaced by some form of distillate: marine gasoil, marine diesel, etc. Maersk, as noted below, called it a “perfect storm” for the shipping industry. Trucking companies will acknowledge it, and you’re starting to hear more talk about it. Still, it hard to find any trucking analysts who say it will impact the trucking business when it goes into effect. But there will be a new competitor for the diesel pool and fuel surcharges may not just pass these costs through so smoothly. Alternatives to using diesel—like LNG or installing scrubbers to remove sulfur from bunker fuel—are workable only with major retrofitting. IMO 2020 remains the transportation industry’s great unknown, and it gets closer every day.
Did you know?
Ocean shipping routes from China/Asia to the U.S. have been on a steady increase this year. Rates to the U.S. West Coast, available on SONAR under ticker FBX.CNAW, are up 30% year-on-year to $2,097 per ffe. The voyage to the U.S. East Coast, under ticker FBX.CNAE, shows a 32% gain year-on-year to $3,319 per ffe.
“Maybe in the near future we can finalize the business. We can cover our demand until November. But for December and January, we are a little short of beans.”
–An anonymous representative from a Chinese soybean crusher, on the sidelines of a conference of soybean buyers and sellers. The conference normally is the site of numerous deals getting done; it reportedly had no business transacted this time, according to Reuters, because of the tariff wars between the U.S. and China.
In other news:
Hybrid energy on the high seas
Maersk is experimenting with sails to supplement normal propulsion on ships. (WSJ)
And given its prediction, it’s easy to see why Maersk would do that
The shipping giant has a dire prediction on the price of fuel (The Loadstar)
The Saudis come through
Saudi oil production in August showed a significant increase over July. (Platts)
Is truck electrification happening sooner or later?
According to this analysis, it will be sooner (The Driven)
Calling all truck drivers in Alberta
A study is underway in Canada on long-haul driver health (Trucknews.com)
This was Underride Week sponsored by the Commercial Vehicle Safety Administration, where underride equipment was to be reviewed by enforcement officials, not so much for the purpose of writing tickets but also for gathering data on underride equipment that can be utilized in the discussion surrounding legislation that would expand the underride mandate. The underride week—which was actually to be just one day—comes after a decision a week ago that upheld a lower court decision effectively exonerating Great Dane, a trailer manufacturer, for not having a side underride defense, which is an added mandate that some activists are seeking and is in the Gillibrand-Rubio legislation that still hasn’t made it out of committee. The Great Dane story is a sad one, with a 19-year-old mother left severely damaged neurologically as a result of “intrusion” under the side of a truck. But for now, a side underride is not required and the Great Dane decision doesn’t move regulation toward it.
Hammer down everyone!