Shippers Want Transparency on Low Sulphur Fuel Impact

The Global Shippers’ Forum (GSF) is calling for more information regarding the impact of low sulphur fuel ahead of the implementation of Emission Control Areas from 1 January 2015.

From January, new legal requirements will come into force in North Europe (including the Baltic Sea, North Sea and English Channel) and North America (200 nautical miles from American and Canadian shores) which will lower the maximum allowed content of sulphur in fuel burned in the ECA’s to 0.1% sulphur from the current 1%.

GSF Secretary General, Chris Welsh, said:

“With one or two notable exceptions, few shipping lines have yet provided information to their customers on their low sulphur fuel strategies and the extra cost to be passed on to shippers via increased rates or bunker surcharges. With shippers under pressure to finalise freight budgets for 2015, this information is urgently required by customers.”

“The fact that there is a range of options for managing the new low sulphur limits means that the impact on costs will be very different from one shipping line to another. For example, fuel costs for new-built vessels capable of using alternative fuels will be substantially different to a carrier using abatement equipment or higher grade marine gas oil.”

As the low sulphur requirements are limited to specific geographical areas, and as there are various options for managing the new sulphur requirements, GSF believes that shippers will require greater transparency from carriers in order to substantiate extra freight charges and bunker surcharges levied by shipping lines to recover additional costs.

The Forum said it had developed a series of questions for shippers to use in their negotiations with carriers based on the approach by individual carriers in meeting the 0.1% lower sulphur limit.

For example, for those applying retrofit scrubber technologies, if additional freight charges or surcharges are levied how much of the cost (running costs and capital costs) are being passed on, and if capital costs are being applied upfront in the form of tariff increases or surcharges, at what point will the extra charges be withdrawn once capital costs have been recouped?

“It is extremely important that individual carriers are open and transparent with their customers about the additional costs incurred resulting from the new sulphur limits, and they fully justify the additional freight charges and surcharges being levied.

Broad industry surcharge guidelines set by some carrier groups are wholly inappropriate to recover additional low sulphur fuel costs because of the significant differences in energy efficiency of vessels, management of fuel and the different options available to carriers in implementing the new low sulphur limits.

It’s clear, however, that information on additional costs is needed now rather than later as shippers set their freight budgets for 2015,” Welsh concluded.

Press Release