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Issue 5 2019 - FBJNA


Maersk is planning on running most of its fleet on low-sulfur fuel and to invest $263 million in scrubbers for retrofitting selected vessels. (Maersk photo.)


///OCEAN CARRIERS


Ocean carriers face frustrations with fuel


By Peter Buxbaum


On April 1, 2019, COSCO Shipping Lines announced that it would adjust its bunker surcharge formula and introduce a new monthly-reviewed


charge


effective May 1. The carrier’s rationale: the International Maritime Organization’s 0.5-percent sulfur mandate taking effect at the beginning of 2020. Maersk and Hamburg Süd


were even more proactive than COSCO, both revising their bunker adjustment factors effective January 2019, a full year ahead of the global sulfur cap implementation,


for rate the same


reason. Zim and Crowley were among the other shiplines that announced


increases in


advance of the IMO requirements. The


new IMO regulation, which will enter into force on


Jan. 1, 2020, aims to reduce the sulfur oxide (SOx) emissions of the world’s 50,000 merchant ships by 80%. While a positive step for the environment, the IMO implementation will add significant additional costs for carriers, and, by extension, for shippers. The carriers do not


underestimate the impact of the new regulation on their businesses. As Junichiro Ikeda, CEO of Mitsui OSK Lines (MOL), told his company’s personnel in his annual message at the beginning of this year: “It is no exaggeration to say that the enforcement of these regulations will mark a major turning point that will have a crucial bearing on the success of the MOL Group as well as the marine transport


industry as a whole.” Shipowners have several


alternatives to lower exhaust emissions. Using liquefied natural gas (LNG) provides a nearly 100% reduction in SOx emissions compared to heavy fuel oil (HFO), while marine gas oil (MGO)


contains 0.10% sulfur m/m (mass of sulfur/total mass), compared to HFO’s sulfur levels of 3.5% m/m. Scrubbers, which require substantial upfront investments, allow ships to use HFO while reducing


SOx emissions by spraying exhaust gas with water.


Other technologies include heat recovery, which converts wasted fuel into electricity; lithium-ion batteries, which are already in use on ships; and fuel cells, a future potential alternative to today’s ship engines, which have been the subject of recent testing. CMA CGM announced that


it will “favor the use of 0.5% fuel oil for its fleet,” will use LNG to power some of its future containerships, while also ordering several scrubbers. That plan is representative of what many carriers plan to do to


The north-south carrier launched a pilot to reduce emissions in Latin American ports over two years ago. (Hamburg Sud photo.)


comply with the new regulations. All in all, industry experts say that carriers will be shouldering $30 billion in additional costs to reduce SOx emissions—providing the rationale for increased carrier fuel surcharges.


Shipper Reactions


Some cargo interests have howled about the carriers’ rate surcharges, and especially their anticipatory application, claiming the rate for shipping a 40-foot container from the Far East to the US West Coast would increase by $683. The British International Freight Association, which represents freight forwarding and logistics companies, described the sulfur surcharges as “unjustified and blatant profiteering.” But Vincent Clerc, chief


commercial officer of Maersk Shipping, answered that charge by saying that the bunker adjustment “is a simple, fair, and predictable mechanism that ensures clarity for our customers in planning their supply chains.” The shippers’ attitude came


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