On 1 January, 2020 new rules come into play globally which aim to reduce sulphur oxide emissions from ships. From that date, all merchant vessels must use marine fuels with a maximum sulphur content of 0.5% compared with the current 3.5%.
The new regulations are being introduced by the IMO (the International Maritime Organization) and are referred to as IMO 2020. The aim of this emissions cut is to significantly reduce the shipping industry’s impact on the general public and the environment.
All ship operators need to comply with these new regulations whether by upgrading vessels or fuel – these new regulations mean increase costs across the board which will be passed on to you the shipper. This is a compulsory change in the rules from 1 January, 2020 and applies to all companies involved in ocean freight forwarding.
The first changes in respect of IMO 2020 will start to be implemented during the month of October 2019 with the whole programme coming into full effect on 1 January, 2020.
The regulation – IMO 2020 – will force ocean carriers to use more expensive, cleaner fuel, or install expensive scrubbers which reduce pollution. Either way, their operating costs will be higher. To offset costs, shipping companies will deploy larger vessels, since an increase in ship size does not mean an equal increase in fuel consumption.
Currently, most cargo ships are in the 10,000 – 14,000 TEU (Twenty foot Equivalent Unit – corresponding to the size of a standard 20ft shipping container) range, with larger ships ranging from 18,000 to 23,500 TEU. One 20,000 TEU ship does not use as much fuel as two 10,000 TEU vessels.
Repercussions for logistics real estate
Most ports can accommodate the sheer size of the larger ships, but they might not be so well placed to process the extra cargo the ships carry.
On the water side, most large U.S., European and Asian ports are ready to receive 14,000-plus TEU vessels. US West Coast ports could handle 18,000-plus TEU vessels, while most major European and Asian ports can handle 22,000 TEU vessels.
“Los Angeles and New York already have severe traffic congestion and larger ships dropping off more cargo could result in paralysis. In Europe, the larger ports of Rotterdam and Hamburg, while in Asia, Shanghai and Hong Kong have similar land side issues.”.
More pressure on the busiest ports means nearby ports with the capacity to develop further logistics infrastructure could win new business, creating opportunities for logistics real estate investment, pointing to Seattle, Tacoma and Oakland on the west coast and Savannah, Norfolk and Charleston on the east coast as examples of ports that could benefit.
“Greek, Italian and Southern French ports also have some headroom,”. “Overall, newer and smaller ports which are not competing for waterfront real estate and highway capacity with residential real estate, such as Savannah on the U.S. east coast, are busting through the gates.”
“With YTD absorption of over 7 million square feet in a market of 66 million square feet, vacancy rates under 1.5 percent and demand outpacing development, developers are scouring the market for land that can put into production immediately.
