bradskelton.com theshippingbloke.com

Monday, October 15, 2018

Green shipping but there is a significant price

Major shipping lines have commenced a cost recovery campaign to compensate for the International Maritime Organisation (IMO) commitment to reduce sulphur emissions from shipping lines by 85% by 1 January 2020.



Two of the largest carriers, Maersk and MSC, have each calculated the costs for compliance to the regulations will add USD2bn in operating costs each per annum which they intend to recover from shippers by way of surcharges.


For CMA CGM the average cost based on current operating conditions will be $160 USD / TEU.

Despite the 2020 effective date of the regulation, Maersk, MSC and others, are introducing their new fuel surcharge mechanisms from 1 January 2019- a year before the regulation kicks in. They say they have a heavy capital expenditure over the next year to prepare vessels and other infrastructure for the different fuels.


RoRo carriers are introducing surcharges in the region of USD1.00 per revenue tonne.
Here are a few of the major shipping lines announcements:
Maersk Line- IMO Regulations 2020: New BAF to replace SBF

MSC- IMO Sulphur Cap Surcharges

CMA CGM- Low Sulphur Regulation 2020

Hapag Lloyd- Marine Fuel Recovery Mechanism

OOCL Fleet moves to meet IMO 2020 Regulation

I have been posting for a long time that container rates are too low and unsustainable and many carriers have been unprofitable and this has caused tremendous consolidation of the container carrier market in particular over the last five years or so.

With the climate of very low freight rates the only thing carriers can do is pass on the sulphur emission cost imposts to their clients. Shippers demand reliable shipping services and simple fact is that takes profitable carriers for services to be sustained.

I have been telling my clients to factor in 10-20% freight increases for sometime however these new surcharges have not been part of my consideration.

I hope that in time the tide will turn as from my perspective GREEN = MORE EXPENSIVE not just for the shipping industry.

All for now,
Brad Skelton

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