IMO 2020: The Big Shipping Shake-Up
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IMO 2020: The Big Shipping Shake-Up

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IMO 2020 shipping Infographic

IMO 2020: The Big Shipping Shake-Up

Over 90% of all global trade takes place on our oceans.

Unfortunately, the network of 59,000 vessels powering international commerce runs on sulfur-laden bunker fuel, and resulting emissions are causing problems on dry land.

As today’s infographic by Breakwave Advisors demonstrates, new emissions regulations taking effect in 2020 will have a big impact on the world’s massive fleet of marine shipping vessels.

The Regulatory Impact

The International Maritime Organization (IMO) – the UN agency responsible for ensuring a clean, safe, and efficient global shipping industry – will be implementing new regulations that will have massive impact on maritime shipping.

The regulations, dubbed IMO 2020, will enforce a 0.5% sulfur emissions cap worldwide starting January 1, 2020 ─ a dramatic decrease from the current emissions cap of 3.5%.

Here are a few ways marine fuel will likely be affected by these regulations:

  • High-sulfur fuel oil will drop in price as the demand drops dramatically after January 1, 2020
  • Diesel, a low-sulfur fuel oil, will be in higher demand and should see a price increase
  • Refiners should also expect higher profits as refining runs increase to satisfy the new regulations

The Economic Impact

IMO 2020 will be one of the most dramatic fuel regulation changes ever implemented, with a significant impact on the global economy.

New regulations are certain to influence freight rates ─ the fees charged for delivering cargo from place to place. These rates can fluctuate depending on:

  • Time and distance between ports
  • Weight and density of the cargo
  • Freight classification
  • Mode of transport
  • Tariffs and taxes
  • Fuel costs

Rising fuel costs means rising freight rates, with much of these costs being passed to consumers.

In a full compliance scenario, we estimate the total impact to consumer wallets in 2020 could be around US$240 billion.

─ Goldman Sachs

The Environmental Impact

Not surprisingly, the world’s 59,000 transport ships, oil tankers, and cargo ships have a consequential impact on the environment.

Bunker fuel accounts for 7% of transportation oil consumption (~3.5 million barrels/day). Burning this fuel generates about 90% of all sulfur oxide and dioxide (SOx and SO2) emissions globally. In fact, the world’s 15 largest ships produce more SOx and SO2 emissions than every car combined.

These sulfur emissions can cause several harmful side effects on land ─ acid rain, smog, crop failures, and many respiratory illnesses such as lung cancer and asthma.

Changing Currents in the Shipping Sector

As IMO 2020’s implementation date nears, shippers have a few courses of action to become compliant and manage costs.

1) Switch to low-sulfur fuel

Bunker fuel use in the shipping industry was 3.5 million barrels per day in 2018, representing roughly 5% of global fuel demand.

Annual bunker fuel costs are predicted to rise by US$60 billion in 2020, a nearly 25% increase from 2019. Price increases this significant will directly impact freight rates ─ with no guarantee that fuel will always be available.

2) Slower Travel, Less Capacity

The costs of refining low-sulfur fuel will increase fuel prices. To offset this, shippers often travel at slower speeds.

For example, large ships might burn 280-300 metric tons of high-sulfur fuel oil (HSFO) a day at high speeds, but only 80-90 metric tons a day at slower speeds. Slower travel may cut costs and help reduce emissions, but it also decreases the capacity these vessels can transport due to longer travel times, which shrinks overall profit margins.

3) Refueling Detours

Adequate fuel supply will be a primary concern for shippers once IMO 2020 takes effect. Fuel shortages would cause inefficiencies and increase freight rates even more, as ships would be forced to detour to refuel more often.

4) Installing Scrubbers

A loophole of IMO 2020 is that emissions are regulated, not the actual sulfur content of fuel itself.

Rather than burning more expensive fuel, many shippers may decide to “capture” sulfur before it enters the environment by using scrubbers, devices that transfer sulfur emissions from exhaust to a disposal unit and discharges the emissions.

With IMO 2020 looming, only 1% of the global shipping fleet has been retrofitted with scrubbers. Forecasts for scrubber installations by mid-2020 run close to 5% of the current ships on the water.

There are a few reasons for such low numbers of installations. First, scrubbers are still somewhat unproven in maritime applications, so shippers are taking a “wait and see” approach. As well, even if a ship does qualify for a retrofit, cost savings won’t take effect until several years after installation. On the plus side, ships with scrubbers installed will still be able to use the existing, widely-available supply of bunker fuel.

Moving Forward

No matter which route shippers choose to take, the short-term impact is almost certainly going to mean higher freight rates for the marine shipping industry.

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Agriculture

Ranked: The World’s Top Cotton Producers

As the most-used natural fiber, cotton has become the most important non-food agricultural product.

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Ranked: The World’s Top Cotton Producers

This was originally posted on Elements. Sign up to the free mailing list to get beautiful visualizations on natural resource megatrends in your email every week.

Cotton is present in our everyday life, from clothes to coffee strainers, and more recently in masks to control the spread of COVID-19.

As the most-used natural fiber, cotton has become the most important non-food agricultural product. Currently, approximately half of all textiles require cotton fibers.

The above infographic lists the world’s top cotton producers, using data from the United States Department of Agriculture.

Fancy Fabric

Originating from the Arabic word “quton,” meaning fancy fabric, cotton is a staple fiber made up of short fibers twisted together to form yarn.

The earliest production of cotton was around 5,000 B.C. in India, and today, around 25 million tons of cotton are produced each year.

Currently, five countries make up around 75% of global cotton production, with China being the world’s biggest producer. The country is responsible for over 23% of global production, with approximately 89 million cotton farmers and part-time workers. Cotton’s importance cannot be understated, as it is the primary input for the Chinese textile industry along with many other nations’ textile industries.

Top Cotton Producers2020/2021 (metric tons)2021/2022 (metric tons)
🇨🇳 China 6,445,0005,835,000
🇮🇳 India6,009,0005,334,000
🇺🇸 United States3,181,0003,815,000
🇧🇷 Brazil2,356,0002,504,000
🇦🇺 Australia610,0001,252,000
🇵🇰 Pakistan 980,0001,306,000
🇹🇷 Turkey631,000827,000
🌐 Other 4,059,0004,282,000
Total24,271,00025,155,000

The United States is the leading global exporter of cotton, exporting three-fourths of its crop with China as the top buyer.

Despite its importance for the global economy, cotton production faces significant sustainability challenges.

The Controversy Over Cotton

Cotton is one of the largest users of water among all agricultural commodities, and production often involves applying pesticides that threaten soil and water quality.

Along with this, production often involves forced and child labor. According to the European Commission, child labor in the cotton supply chain is most common in Africa and Asia, where it comes from small-holder farmers.

In 2020, U.S. apparel maker Patagonia stopped sourcing cotton from the autonomous territory of Xinjiang because of reports about forced labor and other human rights abuses against Uighurs and other ethnic minorities.

L Brands, the parent company of Victoria’s Secret, has also committed to eliminating Chinese cotton from its supply chain. Whether these changes in supply chains impact China’s cotton production and its practices, cotton remains essential to materials found across our daily lives.

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Agriculture

Mapped: Where Does Our Food Come From?

Did you know that over two-thirds of national crops originated from somewhere else? Over time the food that built national diets has evolved.

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The following content is sponsored by Brazil Potash

Where Does Our Food Come From?

Did you know that over two-thirds of national crops originated from somewhere else?

Humans have been selecting and growing crops for specific traits since the origins of agriculture some 10,000 years ago, shaping where and what crops are grown today.

Now our food system is completely global and many of the world’s top producers of staple crops are in countries far from their historical origin. For example, Brazil is now the largest soybean producer in the world, though the crop is originally from East Asia.

The above infographic by Brazil Potash shows the historical origins of crops before they were domesticated across the globe and the main producers of our staple crops today.

Producers Of Staple Crops Today

Staple crops are those that are the most routinely grown and consumed. These can vary between countries depending on availability.

In 2020, sugarcane, maize, wheat, and rice made up around 50% of global crop production.

But when the production and distribution of staple crops are threatened, the consequences can be felt globally. Let’s take a look at the countries that were the top three producers of some of our staple crops in 2020.

CropCountryPercentage of Global Production
Sugar Cane 🇧🇷Brazil 40.5%
Sugar Cane🇮🇳India 19.9%
Sugar Cane🇨🇳China 5.8%
Maize🇺🇸U.S. 30.9%
Maize🇨🇳China 22.4%
Maize🇧🇷Brazil 8.9%
Wheat 🇨🇳China 17.6%
Wheat🇮🇳India14.1%
Wheat🇷🇺Russia11.3%

As you can see from the data above, Brazil is the world’s largest producer of sugarcane and one of the top three producers of maize.

The Future of Food Security

Global food security depends on staple crops and the countries that produce them. As the global population increases, so does the need to grow more crops.

The FAO estimates that by 2050 the world will need to increase its food output by around 70% in order to feed an ever-growing population.

Early food security solutions were transplanting crops from other regions to supplement diets. Now crop yields must increase as the next evolution in strengthening our food security. Fertilizers are a vital step in this process and are an essential ingredient in the future of global food security. They provide vital nutrients that increase crop production and strengthen nutrition security.

Brazil Potash extracts vital potash ore from the earth for it to return to the earth as fertilizer, fortifying food and helping to maintain continuous growth in the agricultural sector.

Click here to learn more about fertilizer and food production in Brazil.

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