Global shipping fuel costs are likely to rise by a quarter, or $24 billion, in 2020 when new rules limiting sulfur kick in, consultants Wood Mackenzie said on Wednesday.
The ballooning costs will come as the change in regulations forces a portion of the world’s fleet to switch to lower sulfur, but higher cost, fuels such as marine gasoil (MGO) and ultra low sulfur fuel oil.
The International Maritime Organization’s (IMO) rules targeting air pollution will cut the maximum amount of sulfur emissions that ships worldwide can burn to 0.5 percent of fuel content by 2020, from 3.5 percent currently.
Ships that install “scrubbers” can continue to burn cheaper high sulfur fuel oil, but the bulk will not install these in time for the shift in 2020.
“Switching to MGO is a more costly solution, and in full compliance, would probably see freight rates increase, perhaps by around $1 a barrel,” said Wood Mackenzie senior research analyst Iain Mowat.
Wood Mackenzie said its “base case” for cost increases is $24 billion in 2020, compared with a total global shipping fuel bill of roughly $100 billion today. However, if no vessels added scrubbers and all ships complied with the rules, the spike could be as high as $60 billion.
The rule change marks a seismic shift for the shipping and refining sectors. The IMO is meeting in London this week to hash out further details on how it will implement the rules and ensure compliance.
Mowat said that while shippers could expect a 20-50 percent return on investment cost for installing scrubbers, the penetration rate for them would be limited by factors including limited access to finance, scrubber manufacturing capacity and dry-dock space. Wood Mackenzie estimates just 2 percent of the global fleet will have scrubbers by 2020.
As a result, Wood Mackenzie said the world’s refiners need to gear up to churn out the lower sulfur fuels that vessels will need, and even the primary spots for refueling ships could shift based on where lower sulfur fuels are available.
“Singapore, for example, could potentially lose some of its market share for bunker fuels to China as shippers look for alternative locations with a surplus of compliant fuels,” Mowat said. “China, with ample MGO supply, is well positioned to attract shippers.”
Shipping fuel costs to spike 25% in 2020 on sulfur cap — WoodMac
Shipping fuel costs to spike 25% in 2020 on sulfur cap — WoodMac
Closing Bell: Saudi main index extends gains as market opens wider to foreign investment
RIYADH: Saudi Arabia’s Tadawul All Share Index rose on Monday, gaining 153.61 points, or 1.38 percent, to close at 11,321.09.
The total trading turnover of the benchmark index was SR5.85 billion ($1.56 billion), as 207 of the listed stocks advanced, while 55 retreated.
The MSCI Tadawul Index increased, up 21.20 points or 1.41 percent, to close at 1,524.18.
The Kingdom’s parallel market Nomu gained 278.13 points, or 1.17 percent, to close at 24,013.03. This comes as 43 of the listed stocks advanced, while 29 retreated.
The best-performing stock was Saudi Pharmaceutical Industries and Medical Appliances Corp., with its share price surging by 7.26 percent to SR28.94.
Other top performers included Rasan Information Technology Co., which saw its share price rise by 6.51 percent to SR144, and Knowledge Economic City, which saw a 6.25 percent increase to SR13.09.
On the downside, the worst performer of the day was Najran Cement Co., whose share price fell by 2.11 percent to SR6.49.
Almasane Alkobra Mining Co. and Saudi Cable Co. also saw declines, with their shares dropping by 2 percent and 1.88 percent to SR103.10 and SR166.80, respectively.
On the announcement front, Riyad Bank has announced its annual financial results for 2025, with the total income from special commission of financing reaching SR24.1 billion, while net income from special commission of financing amounted to SR12 billion.
In a statement on Tadawul, the bank said: “Net income increased by 11.7 percent mainly due to an increase in total operating income and a decrease in total operating expenses.”
The bank further noted that the rise in total operating income was primarily driven by increased revenue from fees and commissions, trading activities, special commissions, gains on non-trading investments, and other operating sources. This growth was partially tempered by declines in exchange and dividend income.
“Net provision of expected credit losses and other losses decreased by 15.8 percent due to a decrease in impairment charge of credit losses and impairment charge for other financial assets, partially offset by an increase in impairment charge for investments,” it added.
RIBL’s share price closed at SR18.18 on the main market, marking a 1.43 percent increase.
