Sulphur Regulation Will Cost Maersk $250Mln More Per Year

Maersk Line has issued a statement revealing the projected financial impact of the new legislation lowering the maximum allowed content of sulphur in fuel burned to 0.1% sulphur from today’s 1.0% in the Emission Control Areas (ECA) in North Europe (including the Baltic Sea, North Sea and English Channel) and North America (200 nautical miles from American and Canadian shore).

Fuel with a sulphur content of 0.1% is significantly more expensive than fuel with 1.0% sulphur content required in ECA areas today.

By 2015, Maersk Line expects to purchase 650,000 tonnes of fuel with 0.1% sulphur content annually for their fleet, equal to 7% of all fuel purchased.

Based on the current price difference of USD 300 per ton (approx. 50%), the additional cost to Maersk Line will be around $250m per year.

On top of that Maersk Line will face increased costs for buying services from third-party feeder operators, who will also have increasing fuel costs.

To offset the additional cost incurred, Maersk Line will incorporate the higher average fuel costs into the existing standard bunker surcharge (SBF).

The expected additional cost to customers in affected trades will be between $50 and $150 per 40’ container to and from main ports, depending on transit time inside ECA areas, and whether they are touching ECA areas at both origin and destination.

Reefer containers will incur higher cost due to fuel used to generate power on board vessels; also cost will fluctuate depending on the volatility of low sulphur fuel prices.

The North American ECA requirements are strongly enforced, but the current weak enforcement of the North European ECA requirements, combined with the significant cost burden increase in 2015 might lead to increased non-compliance.

This would not only weaken the positive effect on air quality, it would also be a major competitive disadvantage for the shipping companies that follow the rules.

 [mappress]

Press Release; July 14th, 2014