Whitepaper: Freight Rates May Rise Due To IMO 2020

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  • Carriers and shippers are bound to face uncertainty due to IMO 2020 regulation because fuel costs constitute over 50% of operating expenses.
  • Seabury Maritime published a white paper on March 4th, in cooperation with Gemini Shippers Group,providing statistics.
  • It expects an increase of USD 600 in present costs of shipping a container from China to the USEC.
  • Several factors affecting a carrier’s calculation of the fuel surcharges make transparency extremely important to build trust.

Carriers and shippers are bound to face uncertainty due to IMO 2020 regulation because fuel costs constitute over 50% of operating expenses, reports the Glory Logistics Joint Stock Company

White Paper Analyses the Changing Tides

Seabury Maritime published a white paper on March 4th, elaborating this uncertainty faced by carriers and shippers. Gemini Shippers Group also aided the production of this paper.

The white paper shows that today’s costs of approximately USD 1,600 to ship a container from China to the USEC, would increase by USD 600 after the IMO 2020 regulation comes into force.

“The 2020 deadline to reduce sulfur oxide emissions is one of the most significant regulations impacting liner shipping in recent memory,” commented Seabury Maritime vice president Nikos Petrakakos. “Fuel costs already represent more than 50 percent of total operating expenses, and so the IMO 2020 poses an increase too large for carriers to absorb and stay operational.”

Trust in Transparency

The white paper says that participants can only roughly estimate the economic impact of fuel surcharges. This is because of the lack of industry standard for their computation. And it may also be because of less clarity of the underlying costs for low-sulfur fuel.

It is evident that several factors affecting a carrier’s calculation of the fuel surcharges add complexity. So, this makes transparency very important to building trust on both sides.

Efforts to Become More Transparent

Kenneth O’Brien, COO of Gemini Shippers Group, said that they have identified the inherent risks and cost drivers represented by IMO 2020. They were able to do this through the collaboration with the partners at Seabury Maritime. Their desire to add transparency to the issues will help shippers and carriers alike navigate the 2019-2020 contracting season.

“The intention of this whitepaper is to promote open dialogue between carriers and shippers by providing insight and a general understanding around metrics used behind bunker calculations,” Petrakakos added.

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Source:Glory Logistics JSC

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