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October 03, 2018

How will low sulphur fuel requirements affect ocean shipping costs?

According to a survey conducted by global shipping consultancy Drewry there is considerable unease among global shippers and freight forwarders ahead of the IMO's 2020 global emissions regulations, due to come into force on 1 January 2020.

Particular uncertainty and concern was expressed by respondents in both the survey and follow-up interviews about carriers' methods of low-sulphur fuel cost recovery with more than half of all respondents (56%) stating that they did not consider their service providers' existing approaches as either fair or transparent. Further to this, 4 in every 5 of the respondents stated that they had yet to receive clarity from their providers as to how the widely anticipated future fuel cost increases, set to accompany the 2020 regulatory change, would be met.

In Drewry's view, the level of uncertainty today as to the total cost impact is so large that nobody is able to provide a confident forecast of the cost of compliance; the only certainty is that the extra cost will run into billions of dollars globally come 2020.

Based on independent "futures" prices, marine fuel prices per tonne will be 55% higher than current high-sulphur fuels and Drewry considers that the probable "worst case" scenario is that fuel costs (paid by carriers) and fuel surcharges (paid by shippers) in global container shipping will increase by 55-60% in January 2020.

Source: Drewry