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Low Sulphur (LSS) Implementation Will Increase Costs of Shipping

The shipping industry has been directed by the International Maritime Organization (IMO), an agency operating under the United Nations, that vessels are to reduce their sulphur emissions to 0.5% effective 1 January 2020.  Currently shipping lines can use fuel with up to 3.5% sulphur content (outside of existing Emission control areas).  

The new regulations will help to significantly reduce the impact of shipping line emissions and will contribute to global efforts to reduce various gas emissions that, as we have all read and heard, is unhealthy to the Earth’s atmosphere.

Some countries have already implemented the 0.5% emission target (e.g. China effective October 2018).

We have been in discussion with various shipping lines and the feedback is that there will significant increase to carrier’s fuel costs by using low sulphur fuels and the phasing in and fitting of equipment to vessels, to help meet the targets.  OOCL has estimated increases of USD 500 to 600 million per year to their fuel costs.  Other carriers with larger fleets (e.g. Maersk and MSC) estimate it will result in USD 2 billion of extra cost to implement the new regulations. While a recent CMA CGM announcement suggest the average costs based on current conditions will cost the USD 160 per TEU.

The fact is all shipping lines are reviewing and assessing the cost of implementation and will be applying LSS fees. Despite the 2020 effective date of the regulation, Maersk, MSC, OOCL and others, are introducing their new fuel surcharge mechanisms from 1 January 2019, however in places like China where the Low sulphur requirements have been implemented, cost recovery fees will start earlier.  ANL has released their implementation from China to all markets effective 15 November 2018

We will continue to keep you updated on the addition of new fees.

The International Maritime Organization (IMO) is the managing body for the International Maritime Dangerous Goods Code (IMDG Code) and you will also be familiar with their introduction of Safety of Life at Sea (SOLAS) convention including the world-wide roll out of Verified Gross Mass requirements in 2016.

If you would like to know more about IMO and who they represent click on this link:

http://www.imo.org/en/About/Conventions/Pages/Home.aspx