A new global legislation to reduce sulfur levels in marine fuel went into effect on Jan. 1, 2020 and is expected to cause a ripple effect—not only in the shipping sector but also across onshore businesses such as the construction industry.

Even though the United Nation’s International Maritime Organization (IMO) 2020 legislation does not specifically apply to the construction sector, market analysts predict that the regulation has the potential to affect worldwide trade flows, increase transportation and shipping costs, and impact price levels and market volatility, which will have a significant impact on supply chains across the globe.

What is IMO 2020?

With net-zero targets being set across the globe, the IMO is looking to lower fuel emissions impacting the oceans, which means setting limits to sulfur levels in fuel, dropping it from 3.5% to 0.5%.

Lower sulfur fuel emits fewer emissions and will bring marine consumption more in line with land- and aviation-based consumption of fuel. It will also lead to shipping companies switching to newer engines that consume low sulfur fuel making them faster and more efficient.

The IMO 2020 mandate has been in the pipeline for years, and is standard across the shipping sector; however, many businesses are unaware of the impact it will have on the construction industry. Increased demand for low sulfur fuel is expected, which may lead to price increases. In addition, fuel supply chains could be affected with delays or stoppages.

Though uncertainty remains around the full impact that IMO 2020 will have on the construction sector, it is being advised that all heavy users of diesel take proactive steps to be aware of potential impacts and take action to mitigate the potential risks.

How can construction businesses mitigate the risks associated with IMO 2020?

Here are some tips on how to prepare for IMO 2020 and avoid risks to construction businesses:

• Keep an eye on the market, especially over the next 6 to 12 months. The period between March and May 2020 may see the biggest impact.
• Competition for diesel is likely to affect demand, which in turn could lead to higher prices. Be aware of supply and demand changes and be ready to act.
• Understand how IMO 2020 might affect the supply chain. Audit the supply chain, end-to-end, and look for ways to adapt will put the business in a prime position to avoid delays or disruptions to fuel supply.

Before embarking on any changes to a business it’s worth seeking expert advice. Those with in-depth knowledge of the markets, on land and at sea, will have a clearer outlook of the potential implications to construction businesses and can recommend steps to take to ensure contractors are prepared for IMO 2020 and beyond.