The early introduction of sulphur cap surcharges imposed by some leading container shipping companies has led to complaints of unfair practice by shippers’ associations in Asia and Europe.
The International Maritime Organization is set to implement the new sulphur limit on 1 January 2020, but there is consternation from freight buyers that they are already being billed for new ‘clean fuel’ surcharges by carriers.
Sunny Ho, the executive director of the Hong Kong Shippers’ Council (HKSC), believes there are questions to be asked of the carriers regarding the surcharges. “How come almost all shipping lines came up with this new charge, more or less at the same time and at the same level?” Ho said.
The 2020 Global Sulphur Limit, a regulation set by the IMO to control air pollution from marine ships and lessen human health issues and environmental problems limits the sulphur content allowed in ships’ fuel oil from 3.5% to 0.5% starting 1 January 2020. Installing approved emission abatement technology, also known as scrubbers, allows ships to reach compliance.
The cost disparity between currently permissible fuel as opposed to that of the new compliant fuel is significant, and several major shipping companies are responding by imposing New Bunker Adjustment Factors (BAF). According to a Maersk press release, the extra fuel costs needed to reach compliance could exceed US$2 billion.
Maersk introduced the new BAF surcharge on 1 January 2019. “We fully support the new rules. They will be a significant benefit to the environment and to human health,” Vincent Clerc, Chief Commercial Officer, A.P. Moller – Maersk said in a press release. “The 2020 sulphur cap is a game changer for the shipping industry.”
In addition to Maersk, several other shipping lines are following suit by adding surcharges to balance the additional costs of compliant fuel, including MSC, CMA CGM, Hapag-Lloyd and ONE, according to a report by Splash247.com.
HKSC’s Ho is concerned about the fees that are being passed to the shippers. “Lines are charging US$20 and US$40 for 20- and 40-foot containers. Multiply (these charges) by the number of containers in each trade; the amount is enormous,” he explained. “Why can’t the shipping lines increase freight rates instead? It is not an unexpected change and lines are well aware of this change. Why not include it in their offers to clients in the first place?”
Ho is not alone in this sentiment. The British International Freight Association (BIFA) has also expressed frustration with the sulphur surcharge, according to a BIFA press release. BIFA reported the increase to a 40-foot container being anywhere from US$480 to US$840 with the new surcharges. “By any measure, these are very major increases,” Robert Keen, BIFA Director General said in a BIFA press release. “Rises of this magnitude are unjustified and could be construed as blatant profiteering by shipping lines determined to exploit the situation.”
Ho feels the increase could be more fairly shared. “If cleaner air benefits everyone, then why put all the burden on shippers? Should other port users, including the lines themselves, bear their part?” he asked.