IMO 2020 silver lining for shippers and carriers alike, Shenzhen TPM conference told
TOP flight shipping analysts largely agreed on challenges that confront world shipping in the next years, saying the news was not all bad - even the draconian IMO 2020 low sulphur fuel regulation would help bring stability to the sector
10 October 2019 - 19:00
'It's not as though the industry has not seen fuel prices like this before,' said McKinsey & Co partner Steve Saxon, who also had a good word for the current wave of mergers and acquisitions that has consumed the industry in recent years.
'Usually, M&As bring about benefits for shippers. The bigger the carrier, the more profitable it tends to be. I think we shall see a few more mergers in the coming years. They are good for all concerned.'
Next in line for a merger, one panelist mentioned 'Taiwan', and there was a murmur of agreement. But Mr Saxon noted there were often barriers to merger because various countries felt it was important to maintain a national flag carrier or they had difficulty accepting that a carrier from one particular country taking over.
Drewry Supply Chain Advisors top analyst Philip Damas said IMO 2020, which will enforce a new costly low-sulphur fuel rule from January 1, said this would likely drive up fuel costs between 35 to 40 per cent. But this would not affect freight rates because it could be handled in fuel surcharges, or BAFs as they are called, bunker adjustment factors.
HSBC shipping analyst Parash Jain said he doubted prices of fuel itself would go up nearly as much as forecast as the supply seemed to be adequate to provide for expected needs. He expected 66 per cent of ships would be using low-sulphur fuel, said to put engines at risk of failure, and 33 per cent would install scrubbers. Hardly any appear to be built for sulphur-free LNG.
IHS Markit shipping analysis Rahul Kapoor, in a discussion of compliance with the new fuel rules, agreed with others that there would be little problem in liner shipping and that non-compliance would be small scale and confined to regional services in third world countries.
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