15 April 2014

[150414.EN.SEA] Shipping Costs To Rocket As Low-Sulphur Fuel Mandates Hit Next Year

LEGAL requirements to use low-sulphur fuel in emission control areas of the North Sea and Baltic Sea will increase costs by as much as US$120 per TEU next year, say Drewry analysts.

Others attending the recent Global Liner Shipping conference in Hamburg predicted even higher costs when other emission control zones in the US and the Mediterranean come into force, reported Lloyd's Loading List.

Mercator International partner Jesper Kjaedegaard added that bunker costs could be higher because increased demand for this type of fuel would drive up prices.

Mr Kjaedegaard said other trades lanes would be more affected, pointing out the US east coast would be a control zone, meaning that 60 per cent of a transatlantic voyage to North Europe would be forced to consume the costly fuel.

Said Drewry Supply Chain Advisors director Philip Damas: "Very few carriers are equipped with liquefied natural gas engines, instead they have to use low sulphur marine diesel oil, or scrubbers.

Carriers are expected to increase bunker adjustment factor charges 20 per cent to cover the higher cost about $300 per tonne, said Mr Damas.

"The impact of this is that the cost per tonne is 50 per cent higher than the current fuel. So it's a huge increase next year," he said.

Drewry's calculations were based on one TEU accounting for a tonne of fuel on the Asia-Europe trade and that portion of the voyage taking place on the North Sea and Baltic Sea emission control areas.

Mr Damas conceded that his estimates were low compared to other companies that predicted costs rising $500 per TEU.

MDS Transmodal managing director Mike Garratt doubted this. saying Mr Damas' estimates were overblown, while agreeing that if the Mediterranean becomes an emissions control area, cost would be even higher.


Source : HKSG.

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