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            november 13, 2019

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Maersk to only charge customers for 'cost recovery' to comply with IMO 2020


AP Moller-Maersk global head of ocean products Silvia Ding says customers should expect to pay more due to the higher pricing of IMO 2020-compliant low sulphur fuels, and that Maersk was only focused on recovering costs and will only charge for the "extra cost of compliance", reported New York's FreightWaves.
"Low sulphur fuels are significantly more expensive," she said. "As multiple industry reports have stated, being in a low-margin industry carriers cannot shoulder the cost alone; it must be passed on through the supply chain."
Maersk will adjust its bunker adjustment factors (BAF) based on the price of low sulphur fuels from January 1 for long-term contracts of more than three months.
For spot business and shorter contracts of less than three months, the carrier is introducing on December 1 an environmental fuel fee (EFF), a mechanism intended to recuperate the higher costs of the more expensive fuel needed to meet the International Maritime Organization's new low sulphur cap rule.
"Our efforts for long-term BAFs and short-term EFFs focus on recovering the extra cost of compliance and are based on principles of simplicity and predictability for our customers to be able to plan their supply chains," said Ms Ding, reported American Shipper.
Unless vessels have been fitted with some form of emission abatement technology such as scrubbers, the new IMO regulations mandate that the sulphur content of marine oil used by ships operating outside designated emission control areas (ECAs) must not exceed 0.5 per cent.
Drewry Shipping Consultants now estimates ocean liners will have to bear an additional US$11 billion fuel bill next year due to the switch to low sulphur fuel oil.
Shipping bodies also fear there could potentially be fuel shortages and discrepancies in standards.
Ms Ding said the introduction of low sulphur fuels could see some fuel supply issues in the early weeks of next year. "We see sufficient availability of compliant fuels; however, we expect increased instances where ports in some confined areas see a limited supply of 0.5 compliant fuels."
She said: "In such cases we would rely on more expensive 0.1 marine gas oil to get to the next port with 0.5 per cent fuel oil availability. This adds cost and complexity and we expect it to happen more frequently in the transition period around January 1 2020 than later in 2020 where supply and demand is expected to balance out."
The carrier has established joint initiatives with Vopak, Koole and PBF Logistics for 0.5 per cent compliant fuel storage and processing facilities in Rotterdam in the Netherlands and New Jersey in the US.
"The fuel manufacturing process allows Maersk to produce compatible low sulphur fuels that comply with the IMO 2020 sulphur cap implementation, reducing the need to rely on 0.1 per cent price-based gasoil and fuel oil outside the ECA zones," said Ms Ding. "This will be an important driver in ensuring stable, reliable services for Maersk's customers during a potentially volatile period for global shipping."

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