Shippers must foot sulphur fuel bill, says SeaIntel

Weighing into the sulphur debate, SeaIntel said shippers will have little choice but to pay the extra $11.2bn incurred cost as a result of the impending climate change agenda levy.

Maersk Line, Mediterranean Shipping Co and CMA CGM are among carriers that have announced plans to introduce bunker surcharges to mitigate against spiralling costs.

These have drawn criticism from shippers, with both the Global Shippers’ Forum and the British International Freight Association voicing concerns.

“Of course, any type of bunker adjustment factor mechanism can be criticised - but given the reality of the low-sulphur rules and the associated costs, shippers who are critical of the new structures owe it to the industry to then explain how they intend to pay the added fuel cost,” said SeaIntel. “At the end of the day, there is no-one else to foot the bill.”

Shippers have also argued that carriers should look to meet new air quality standards by fitting scrubbers to clean up exhaust emissions, as an alternative to buying more expensive low-sulphur fuel. This requires a major one-off capital expense for carriers, but SeaIntel added that it is “physically impossible to equip more than a minority of the vessels with scrubbers in time”, while LNG-fuelled ships will “remain a tiny exotic part of the fleet”.

SeaIntel pointed to how Maersk Line is anticipating that the cost of compliance in monetary terms will be close to $2bn annually, which if used as an industry yardstick will mean a total cost to the industry of about $11.2bn.

“Putting this into perspective, the 13 largest carriers who provide financial accounts had combined cumulative earnings before interest and tax of just $8.6bn in the six years spanning 2012-2017,” said SeaIntel.

Last year, the 13 largest carriers had combined earnings before interest and taxes of just $3.5bn. “It is therefore evident that the carriers cannot in any way absorb the added costs stemming from the low-sulphur rules.”