Dive Brief:
- Freightos predicts ocean freight rates could rise 5% to 10% over the next week as sulfur surcharges kick in ahead of IMO 2020, Splash reported.
- The price increases will vary based on the trade lane, said Philip von Mecklenburg-Blumenthal, vice president of Freightos.
- Many large shipping lines announced surcharges or bunker adjustment factors last year that went into effect Jan. 1.
Dive Insight:
2019 will be a year of change and adjustment as shippers and carriers alike prepare for requirements of a lower sulfur cap.
Starting at the beginning of the year, shippers transporting their goods through ONE, Hapag-Lloyd and Maersk Line faced some form of a surcharge, dependent on the calculations of the carrier and the trade route.
Carriers face two choices in making their fleets compliant with the 0.5% sulfur cap: retrofit older ships with scrubbers to reduce emissions or invest in vessels that use low-sulfur fuel.
As of Dec. 11, carriers had added scrubbers to more than 250 ships, Drewry Maritime Consultants said. But scrubbers can cost anywhere from $1 million to $10 million per vessel.
Many shipping lines find scrubbers are simply not worth the cost and effort needed to retrofit older ships. As a result, the end of last year saw an uptick in ships sent to the scrapyard, with carriers choosing instead to purchase new vessels.
Either way, shippers foot much of the bill in the form of surcharges and will need to conduct cost analyses to incorporate the higher fees into their business plans.
In A.T. Kearney's 2019 predictions published last year, consultants forecasted the shipping industry would "crash" into new sulfur regulations, due to a "low level of readiness to comply with these regulations."
Shippers and carriers must also consider the uncertainty of the new fuel market. "Prices for a variety of fuel types ... will be more volatile as refiners and fuel purchasers pursue a pricing advantage before the January 1, 2020 deadline," A.T. Kearney wrote.
