Shippers do not yet have a clear idea of how much they will have to pay for the new Low-Sulphur Surcharge (LSS) come 1 January 2020, the implementation date of the International Maritime Organization’s 2020 regulation to reduce sulphur emissions from ships. The surcharge will apply to all ocean-going vessels worldwide.

According to Sunny Ho, Executive Director of the Hong Kong Shippers Council, there has not been any discussion between the carriers and shippers about the level of the charges.

Ho said that some carriers in Hong Kong are already levying surcharges of US$20 per TEU and US$40 per FEU in the main trades as the Hong Kong Special Administrative Region (HKSAR) Government requires shipping lines to use low-sulphur fuels when entering Hong Kong waters.

“Before the local LSS charges were introduced in January this year, we didn’t have any discussions about the fees.”

Ho is calling for more transparent negotiations between shipping lines and shippers as the deadline for implementation gets close.

“Since low-sulphur fuel is a global and industry-wide condition, the charge should be part of normal operational requirements for shipping lines and incorporated into the freight rate as part of negotiations between shippers and carriers, instead of a separate charge item,” said Ho.

The ban on collective bargaining between shipping lines, through the US and EU anti-trust legislation, means there will be individual arrangements made between carriers and their customers to establish surcharge levels.

In the grand scheme of things, Maersk estimates the Low Sulphur Regulations will result in more than US$200 million in fuel cost increases per carrier per year.

In addition, many high-volume shippers with direct carrier contracts have a ‘no surcharge’ clause, which would leave the carrier exposed to absorb the LSS costs.

Globally, the LSS varies by carrier and routing, ranging from US$30 to US$110 per TEU and US$60 to US$220 for an FEU.

Source: Drewry Maritime Research