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            september 15, 2019

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Busworld 2019


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Carriers turn to floating contracts to cope with IMO 2020 fuel costs


Collecting fuel costs from shippers through the contract design is one plan gaining favour among ocean carriers coping with UN's draconian low-sulphur fuel rule that takes effect January 1.
One plan is to work floating mechanisms into contracts to account for fuel prices. Zim vice president Jeroen Brenters and Ocean Network Express (ONE) North American sales chief Maria Bodnar agreed that incorporating floating mechanisms into import contracts was the way to go.
They were panelists at the JAXPORT 2019 Logistics & Intermodal Conference, which took place a day before the typical May 1 start date of transpacific contracts.
Hapag-Lloyd vice president Stuart Sandli said fuel variability has long been covered in contracts in every other mode of transportation, reported American Shipper.
The IMO 2020 mandate requires ships use fuel with a sulphur content of 0.5 per cent, down from the fuel with a 3.5 per cent often used today, unless it is equipped with scrubbers to remove sulphur from the engine exhaust. The move to cleaner fuel is estimated to increase prices by $10 billion to $15 billion for the container shipping industry.
Hyundai Merchant Marine in March signed a memorandum of understanding to establish a fund for scrubber installation and plans to complete the installation on 19 containerships currently in use by the first half of 2020.
NYK also entered into a JPY9 billion (US$806.9 million) syndicated loan agreement with the proceeds devoted to buying and installing emissions scrubbers.
Half of the ten 15,000-TEU containerships CMA CGM ordered in March will be fitted with scrubbers, while the remaining five will be fueled by LNG.
Hapag-Lloyd is installing scrubbers on 10 vessels and is converting one of the 17 ships it acquired from its 2017 purchase of United Arab Shipping Co to run on LNG.

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