Carriers prepare seagoing vessels for IMO 2020

Surcharges take fuel price and trade into account

Starting 1 January 2020, seagoing vessels will have to reduce their emissions of sulphur oxides by 85 percent. Then only fuels with a maximum sulphur content of 0.5 percent will be permitted, instead of 3.5 percent as before. The regulation of the International Maritime Organization (IMO) is intended to protect the environment and health. The Managing Director of a. hartrodt, Willem van der Schalk, welcomes this objective. For ocean freight customers, however, he states: "Obviously the necessary step towards to a greener future comes at a price".

Carriers have three options

The carriers are currently testing three options to meet the IMO 2020 requirements. Large carriers are primarily switching from heavy oil to more expensive Very Low Sulphur Fuel (VLSF) or Marine Gas Oil (MGO). Alternatively, investments are made in scrubbers that clean exhaust gases. Liquefied Natural Gas (LNG) is also permitted as ship propulsion because neither sulphur oxides nor soot particles are produced during combustion. The carriers want to recover the costs for the fleet conversion by means of fuel surcharges, which a. hartrodt must pass on one-to-one.

Surcharge differs from carrier to carrier

"The exact calculation of the IMO 2020 surcharge differs from carrier to carrier, as does the time at which it is invoiced," summarises van der Schalk. Three examples: From 1 December 2019, Cosco Shipping will charge a Fuel Adjustment Fee (FAF) for short-term contracts and a Bunker Charge (BUC) for long-term contracts. Maersk adjusts the Bunker Adjustment Factor (BAF) and introduces an Environmental Fuel Fee (EFF). Since February, Hapag-Lloyd has gradually introduced the "Marine Fuel Recovery" (MFR) mechanism. In addition to general price fluctuations, the trade also influences the calculation.

According to the current status, a quarterly adjustment is planned. "But we'll have to see whether it stays that way," says van der Schalk. The carriers have not yet published all the details for the calculation. a. hartrodt will keep all customers informed.