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January 6 2020

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22 The Journal of Commerce | Januar y 6 2020 www.joc.com Maritime 2020 ANNUAL REVIEW & OUTLOOK the sulfur content of bunker fuel at 0.5 percent, down from 3.5 percent previously. With carriers having transitioned their fleets to the more costly low-sulfur fuel oil (LSFO) or retrofitted their vessels with scrubbers in order to continue using high-sulfur fuel, the industry's annual fuel bill is projected to increase $10 to $15 billion. Vessel operators began transi- tioning to the costlier fuel in late 2019, with most carriers implement- ing interim LSFO surcharges for spot and short-term contract rates. According to shippers who spoke with The Journal of Commerce, the interim charges added about $150 per FEU in bunker surcharges from Asia to the West Coast and $250 per FEU to the East Coast. As the true market price for LSFO develops early in 2020, carriers will transition to TRANS-PACIFIC OCEAN CARRIERS are entering the new year with two im- portant tasks in mind: deciding what level of low-sulfur fuel surcharge the market will bear, and how much they will be able to increase rates during annual service contract nego- tiations this spring — if at all. With the likelihood of another year of slow growth ahead in the largest US trade lane, carriers' only option to stay afloat may be to repeat the tight capacity management that kept a floor on rates in 2019. Early indications are that this will be the carriers' strategy in 2020. Member lines of the Ocean Alliance (CMA CGM/APL, Cosco Shipping/ OOCL, and Evergreen Line) in late November announced nine blank sailings to take place in February, which will likely be the slowest month of 2020 because many fac- tories in Asia will be closed for up to two weeks during annual Lunar New Year celebrations beginning Jan. 25. Announcements of additional blank sailings by other alliances and inde- pendent carriers are likely as the Lunar New Year approaches. Fuel will play a critical role in ocean carrier pricing this year following the Jan. 1 imposition of the IMO 2020 mandate, which caps Trans-Pacific lines look to manage capacity, pass fuel costs on to customers By Bill Mongelluzzo Press repeat

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