OCEAN CARRIERS\\\ >> 16


as no surprise to the analysts


at Drewry, who believe that


carriers will be fairly successful in collecting the surcharges thanks to the wider market acceptance of burden sharing and the fact that the ship lines started discussing the issue with shippers early on. “It is essential that carriers


increase their fuel recovery ratio, or else there will be serious consequences,” said


Simon


Heaney, Drewry’s senior manager for container research.


Seeking Alternative Sources


The carriers have been busy securing alternative fuel sources since early this year. COSCO signed a supply agreement with Double Rich Limited in March, 2019, which will provide the carrier with low-sulfur fuel oil. COSCO also installed scrubbers on two of its vessels on a pilot basis, and announced it will be investing further in that technology. Maersk is also planning on


running the vast majority of its fleet on low-sulfur fuel and to invest in scrubbers—to the tune of $263 million—for retrofitting selected vessels. “The purpose of the strategy,” said Clerc, “is to mitigate the risk of fuel price uncertainty in 2020.” Well over a year ago, CMA CGM


signed an agreement with Total Marine Fuels Global Solutions covering the supply of 300,000 tons of LNG per year for 10 years starting in 2020. The LNG will fuel CMA CGM’s nine new 22,000- TEU container ships, scheduled for delivery beginning in 2020. “LNG is the fuel of the future for shipping,” said Rodolphe Saadé, CEO of CMA CGM, in a statement. Over two years ago, Hamburg


Süd launched a pilot with its customer Electrolux in the Chilean Port of Iquique during which auxiliary engines and boilers switched from HFO to MGO during layovers. “Both sides accepted


additional expense and higher costs to make the value-added chain more sustainable,” said Ottmar Gast, chairman of Hamburg Süd’s executive board. Electrolux bore the additional


costs for the MGO, while Hamburg Süd assumed the extra operating expenses related to planning and switching fuels. In April 2018, Hamburg Süd and Electrolux teamed up on similar projects to reduce SOx emissions in the ports of Manzanillo, Mexico, Callao, Peru, and Puerto Angamos, Chile. Using MGO decreased the SOx emissions attributable to the Electrolux cargo by over 95%. It remains to be seen how


much of the fuel-cost increases carriers will be able to pass on to their customers, but the results could be make-or-break for the industry. A Drewry analysis covered two scenarios: one, which assumed that carriers would manage to pass on 75% of


“[The bunker adjustment] is a simple, fair, and predictable mechanism that ensures clarity for our customers in planning their supply chains.” -- Vincent Clerc, Maersk Shipping


Issue 5 2019 - FBJNA “Both sides accepted additional


expense and higher costs to make the value-added chain more sustainable.” -- Ottmar Gast, Hamburg Süd


the cost difference between the high sulfur and more-expensive low sulfur fuel, and second, which anticipated a 50-percent recovery. According to Drewry’s calculations, securing the higher rate would lead to a profitable industry in 2020, while the lower recovery rate would result in losses that could trigger more carrier consolidation. “Most shippers accept that


they will have to pay more,” said Heaney, “but they expect any increase to be justified with a credible and trusted mechanism. In other words the ball is very much in the carriers’ court.”


CMA CGM announced that it will use of 0.5% fuel oil for its fleet, use LNG to power some of its future containerships, and will order several scrubbers. (Photo by Peter Buxbaum)


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