The Legislative Council of Hong Kong will soon mandate fuel burning 0.5% sulfur or liquefied natural gas (LNG) for all ocean-going vessels (OGV) ships at its berths. In September 2012, the government launched a three-year incentive program to encourage OGVs to switch to low-sulfur fuels. By June 2014, only about 12% of the OGVs registered, with operators indicating that the rebates covered only 40% of the cost of switching fuels.
The Hong Kong government wants mandatory the use of 0.5% (5,000 ppm) sulfur fuel starting by July 2015. In 2013, Chinese ports handle about 178 million TEUs (30%) of the world’s 600 million TEUs -- Hong Kong (22.3 million TEUs) is the third largest port in China behind Shanghai (33.6 million TEUs) and Shenzhen (23.3 million TEUs).
These higher standards will make Hong Kong the first Asian jurisdiction to control its ports’ ship emissions. The proposal has raised some concerns from operators who will bear the brunt of the increased shipping costs due to the required switch to low-sulfur marine fuel.
On January 1, 2015, the United States including the U.S. Caribbean, Canada and Northern Europe have required ships docked in the sulfur emission control areas (SECA - ECA) at their ports to switch to fuel with less than 0.1% sulfur content. Container companies operating in the SEAC-ECA areas have since levied an additional $30 to $90 per TEU from their customers to support the increased fuel costs.
Low-sulfur fuel is up to $300 more per ton compared to marine bunker, which contains around 3-3.5% sulfur. Fuel costs account for up to 30% of a shipping line’s operational costs.
According to a spokesperson for the Environmental Protection Department of Hong Kong, "the Regulation prohibits OGVs from using any fuel other than compliant fuel while at berth in Hong Kong, except during the first hour after arrival and the last hour before departure. And, vessels are required to record the date and time of fuel switching and keep the relevant records for three years.
“If OGVs use technologies (scrubbers), which can reduce the emission sulfur dioxide (SO2) levels to that of low-sulfur marine fuel, they will be exempted from switching to compliant fuel.”
Ship owners calling Hong Kong that do not comply with the law will be fined a maximum of about $25,000 (HK$200,000) and six months imprisonment. And, ship owners failing to keep the required records of fuel switching will be liable to a maximum fine of about $6,400 (HK$50,000) and three months imprisonment.
Just 35 years ago, Hong Kong was China’s largest container port for container imports and exports. Currently, China has seven of the top 10 ports in the world and Hong Kong’s container traffic throughput has been in decline. Meanwhile, nearby Shenzhen’s municipal government promised to subsidize carriers 100% for switching to low-sulfur fuel last year in an attempt to attract vessels to the ports. While the traffic has come, Shenzhen has failed to implement the rebate.
As for emission control areas in the rest of the world, ICS Chairman Masamichi Morooka says that the global cap will most likely be implemented in 2020, regardless of the lack of available compliant fuel and the cost it could have on the sea’s world trade. When implemented, the drop to 0.5% sulfur fuel could cost the shipping industry as much as $50 billion a year, and will once again affect lubricant choice.