Has the low sulfur strategy benefited the maritime supply chain?

Abstract

Owing to the IMO 2020 low sulfur regulation, shipping carriers have adopted either very low-sulfur fuels or scrubbers, altering their cost structures and competitiveness. This study examines the regulation’s impact on low sulfur strategies by building game theory model of two carriers under scenarios with and without the regulation. The results reveal that while the regulation can disadvantage shippers, it potentially benefits carriers and fuel suppliers. However, in low-competition contexts, the carrier without slow steaming might struggle due to the low sulfur requirement, thus minimizing shipper losses. The research aims for an equilibrium low sulfur strategy, uncovering that speed does not always enhance market share or profits. Utilizing scrubbers achieves Pareto efficiency, avoiding the prisoner’s dilemma present in other strategies. Furthermore, the optimal equilibrium may enhance maritime supply chain benefits, emphasizing the importance of strategic low sulfur adoption and regulatory compliance for sustainable competitive advantage.