Bunker Charge to Cover $2bln Fuel Cost by MSC

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  • MSC is planning to introduce a bunker charge from next year to compensate for the IMO sulfur cap expenses.
  • With the deadline nearing, MSC might have to spend over $2 billion dollars per year on fuels
  • The company owns more than 500 vessels and hence they need to invest in low-sulfur fuels to keep them going.
  • To meet the regulatory demands, they are opting for a combination of strategies of using low sulfur fuels and scrubbers.

As the UN agency the International Maritime Organisation (IMO)  prohibits ships from using fuels with sulfur content above 0.5 percent from Jan. 1, 2020, the Swiss-headquartered MSC have to pay over $2 billion (1.57 billion pounds) a year in fuel costs, Jonathan Saul reports for Reuters.

Managing the Expenses

The new rules which doesn’t allow burning of sulphur fuel above 0.5% by ships unless they are equipped with exhaust gas cleaning systems, known as scrubbers, to clean up sulphur emissions,  has made it tougher for shipping companies like MSC who will introduce a bunker charge next year to recoup expenses, the world’s number two container line said.

For shipping companies struggling from years of weaker earnings, the new regulations are expected to mean more cost pressure.

How will they do it?

“MSC has estimated that the cost of the various changes we are making to our fleet and its fuel supply is in excess of two billion dollars (USD) per year. We have already had to start incurring these costs to be ready for 2020,” the group said in a Dec. 1 note.

MSC said it would levy a bunker recovery charge from Jan. 1, 2019 “as a result of the regulatory changes we all support”.

Why is it needed?

The privately-owned group has a fleet of 510 vessels with a total capacity of 3.3 million TEUs, which includes both owned and chartered vessels, an MSC spokesman said on Monday.

“Clearly, MSC will need to use a large amount of low-sulphur fuels to propel the fleet, in order to meet the 2020 low-sulphur cap,” the spokesman said.

The Way Out

“At the same time, a significant portion of MSC’s owned ships will be equipped with exhaust gas cleaning systems. For a shipping line of our size, with a global network, it makes sense to have a combination of these solutions.”

In September, Denmark’s Maersk Line (MAERSKb.CO) – the world’s number one container shipping carrier – said it would introduce a new bunker adjustment factor surcharge from Jan. 1 2019. Maersk has said it expected extra fuel costs of at least $2 billion annually.

Apart from scrubbers and low sulphur fuel, shipping companies can also use LNG as an alternative marine fuel, although its usage is still at an early stage.

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Source: Reuters

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