GERMAN shipping giant Hapag-Lloyd has established a Marine Fuel Recovery (MFR) mechanism to cope with the rising prices of compliant fuel when the new sulphur cap on ship emissions comes into force in January 2020.
'With our MFR, we have developed a system for our customers that we think is fair, as it allows for a causal, transparent an easy-to-understand calculation of fuel costs,' said Hapag-Lloyd CEO Rolf Habben Jansen.
'The utilisation of the compliant low-sulphur fuel rule comes along with an increase in bunker costs, which experts say will cost US$60 billion annually for the entire shipping industry,' said the Hapag-Lloyd statement.
While environmental regulation and costs from low-sulphur fuel represent a major challenge, the company's new MFR 'allows causal, transparent and easy-to-understand calculation of fuel oil costs'.
Explaining the basis of its MFR, the company said: 'On the assumption that the spread between high-sulphur fuel oil (HSFO) and low-sulphur fuel oil (LSFO 0.5 per cent) will be $250 per tonne by 2020, Hapag-Lloyd estimates its additional costs being $1 billion in the first years. Therefore, a Marine Fuel Recovery mechanism was developed, which will be gradually implemented from January 1 and replace all existing fuel-related charges.'
This will be mainly reflected in the fuel bills for low-sulphur fuel oil, as there is no realistic alternative for the industry remaining compliant by 2020.