[160120.EN.SEA] New Cleaner Marine Fuel Costs Dampen Hapag-Lloyd's 2020 Profit Outlook

THE more stringent rules imposed at the start of the year on sulphur emissions from marine fuel ships by the International Maritime Organisation (IMO) is bearing down on the profit forecast for German container shipping line Hapag-Lloyd this year following a good 2019.

The German carrier is expecting to incur additional operating costs of around US$1 billion a year starting 2020 due to the new IMO 2020 global regulation, according to chief executive Rolf Habben Jansen.

"This will make it difficult for us to achieve a better (2020) result," Mr Hannen Jansen told reporters in Hamburg, adding that IMO 2020 was shaking up the oil and shipping industries.

Above-market growth rates in transport volumes in 2019, put Hapag-Lloyd on a good course with its profits helping to offset higher costs from the use of more expensive marine fuel and vessel refits, he added, reported Reuters.

The carrier - the world's fifth biggest container liner - prepared early for the new regulation, including the staggered introduction of a mechanism to pass on some extra costs for IMO-compliant fuels to its customers.

It also modernised its fleet through its purchase of Gulf peer UASC, switching to more efficient vessels, and it continues to analyse all technological options to reduce emissions such as scrubbers and switching to ships run on liquefied natural gas (LNG).

Transport volumes is expected to have risen by 1.5 per cent last year compared with an assumed moderate global industry growth rate of one per cent, Mr Habben Jansen also highlighted.

Mr Habben Jansen added that the bulk of IMO-related burdens would become evident in the first half 2020 while he was optimistic the expansion of transport volumes could continue throughout the year.

He also said that new ship orders could be considered again this year after a long period of restraint.

"We will have to start replacing ships in our fleet from 2022, 2023," he said. This could include ships with up to 23,000 TEU capacity. Currently, its biggest ships can carry 19,000 TEU.

Source : HKSG.