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November 12 2018

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Page 16 of 55 November 12 2018 | The Journal of Commerce 17 Container Shipping Cover Story Special Report bers" on vessels to remove sulfur from the engine emissions using regular fuel; or use ships that run on liquefied natural gas (LNG). Industry estimates put the annual cost of the rule at $13 billion to $15.7 billion. "The importance of this regu- lation is massive, due first of all to the impact it is going to have on air pollution and the environment, but also on the industry," said Mathieu Giardin, vice president of CMA CGM's Asia regional office. The Marseille-based carrier ex- pects that it will raise per-TEU cost by $160. Hapag-Lloyd has issued a range of estimates from $115 to $333 per TEU. Maersk Line estimates its BAF will add between $90 to $1,050 of cost per FEU, with a rough TEU conversion coming at a range of $45 to $1,025. In an October announcement of a new BAF formula and fuel cost benchmarking service to help shippers, Drewry estimated fuel surcharges will "increase by 55 to 60 percent" in January 2020, while Jefferies has estimated the low-sulfur fuel will cost at least 50 percent more than current high-sulfur prices. WITH JUST A little over a year before the annual bill for container shipping jumps when new global rules requiring the use of low-sulfur fuel take effect, the range of costs carriers will aim to pass on to beneficial cargo owners (BCOs) is coming into focus — as is the dimming chances of any rule reprieve. The failed late October attempt by some members of the Interna- tional Maritime Organization (IMO) to delay some provisions of the rule taking effect Jan. 1, 2020, underscores shippers' drive to figure out just how much more they'll be paying for ocean shipping. While estimates and the low-sulfur bunker fuel adjustments (BAF) differ, a general sense of the cost of more expensive fuel — a cost carriers will attempt to add on to the average TEU shipped — is becoming more apparent: at least a 30 percent jump in fuel prices. The IMO regulation requires ocean carriers to reduce maximum sulfur emissions from 3.5 percent to 0.5 percent, leaving carriers to assess which of three main ways to comply with the rules they will adopt: use low-sulfur fuel (LSF), install "scrub- Carriers offer wide range of forecasts for costs to meet IMO low-sulfur mandate By Hugh Morley and Mark Szakonyi Cost Calculations $350 $370 $390 $410 $430 $450 $470 $490 $510 2-Apr 30-Apr 28-May 25-Jun 23-Jul 20-Aug 17-Sep 15-Oct Price per metric ton Bunker fuel prices creep up Source: IHS Markit © 2018 IHS Markit Average cost of IFO 380 bunker fuel at Shanghai, Rotterdam, and New York-New Jersey

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