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Greater number of trans-Pacific carriers to levy interim IMO surcharges in Nov

STARTING next month, an increasing number of trans-Pacific trades will announce the low-sulphur fuel oil (LSFO) surcharges they intend to charge shippers in November and December prior to the implementation of the International Maritime Organization's LSFO requirements taking effect January 1

Greater number of trans-Pacific carriers to levy interim IMO surcharges in Nov

STARTING next month, an increasing number of trans-Pacific trades will announce the low-sulphur fuel oil (LSFO) surcharges they intend to charge shippers in November and December prior to the implementation of the International Maritime Organization's LSFO requirements taking effect January 1

20 September 2019 - 19:00

STARTING next month, an increasing number of trans-Pacific trades will announce the low-sulphur fuel oil (LSFO) surcharges they intend to charge shippers in November and December prior to the implementation of the International Maritime Organization's LSFO requirements taking effect January 1.

The final two months of the year will likely be confusing for beneficial cargo owners (BCOs) because each carrier will have its own temporary surcharges for spot and contract shipments based on how much LSFO their vessels consume during the interim period, reports IHS Media.



Carriers can either burn higher-cost LSFO or marine gas oil or install scrubbers to continue using lower-cost high-sulphur fuel oil (HSFO).



Cargo owners say they are increasingly under pressure to determine the scale of higher fuel surcharges they have to pay. A recent Drewry survey found that 16 per cent of the respondents believe the cost impacts of the IMO 2020 regulation will be significant, and 6 per cent say it will be extremely significant. Some 23 per cent of the respondents were uncertain what the cost impact will be.



According to customer advisories issued by carriers, BCOs can expect a variety of sucharge plans in the short term. Each carrier is calling its low-sulphur fuel surcharge by a different name. And they are speculating on the cost of a blended fuel that has virtually no market liquidity yet. In effect, carriers will be 'partially charging' fees during this transition period.



BCOs have been equally diverse as to how they are approaching the IMO 2020 mandate. Some BCOs have brought third-party experts with them to meetings with carriers, and they have provided detailed analyses as to what they believe the additional cost for low-sulphur fuel should be.



The Coalition for Responsible Transportation (CRT), an association that represents BCOs on matters involving regulations, environmental responsibility and freight transportation efficiency, has not sat in on those negotiations, but Stephen Cadden, executive director of the CRT, said the intentions of his members in the carrier discussions are clear.



'They want transparency. They want charges to be fair and equitable. They don't want it to be a profit centre for the carriers,' Mr Cadden said.



According to the Drewry survey, 56 per cent of the respondents do not believe the current methods of fuel cost recovery are sufficiently fair and transparent.



Hapag-Lloyd told IHS Media that in order to fulfill regulatory requirements from government agencies such as the Federal Maritime Commission and the European Union, it will provide 30-day advance notice of its intended surcharges.



Actual surcharges for the new fuel, which Hapag-Lloyd will call Marine Fuel Recovery (MFR) charges, will begin in the fourth quarter. 'Hapag-Lloyd will start charging customers partially for LSFO as of Q4 2019, which is in line with the cost exposure by preparing our vessels to be ready and fully compliant as of January 1, 2020 (eg cleaning tanks, filling vessels with LSFO).'



Maersk Line in a customer advisory early this month said it will introduce its Environmental Fuel Fee (EFF) 'on all trades, which will apply to all spot business and contracts with validity up to three months'. The EFF will be 'calculated as the price difference between high-sulphur fuel and low-sulphur fuel multiplied by a trade factor,' the customer advisory stated.



Maersk said that the EFF tariffs will be applicable from December 1 and will be announced at the end of October. As for fee adjustments due to price volatility, 'The EFF tariffs will only be reviewed in case of significant fuel price fluctuations (more than US$50/tonne),' the advisory stated.



Some carriers have presented customers with a matrix that projects surcharges based on cost ranges of the component fuels. Mediterranean Shipping Co presented a chart on its proposed bunker recovery charge (BRC) broken down by TEU and FEU to the East Coast and West Coast. The low-sulphur surcharges range from $10 to $19 per TEU and $11 to $21 per FEU on top of base bunker charges of $200 to $360 per TEU to the West Coast and $400 to $720 per FEU to the East Coast. MSC stated in the advisory the bunker and low-sulphur surcharges will be effective October 1-December 31.



Ocean Network Express (ONE) in a customer advisory presented a chart with its new one bunker surcharge (OBS). The additional costs listed are $82 per TEU and $164 per FEU to the West Coast and $138 per TEU and $276 per FEU to the East Coast.



In the meantime, some carriers have estimated the industry and carrier-specific costs based upon their projections on the spread between today's high-sulphur costs and estimates of low-sulphur costs. Hapag-Lloyd said in its analysis: 'The utilisation of the compliant low-sulphur fuel oil comes along with an increase in fuel costs, which experts estimate to initially amount to $60 billion annually for the entire shipping industry. On the assumption that the spread between high-sulphur fuel oil and low-sulphur fuel oil will be $250 per tonne by 2020, Hapag-Lloyd estimates its additional costs being around $1 billion in the first years.'


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