Sulphur Cap to Push Boxship Operators’ Costs Up to USD 30Bn

Image Courtesy: Maersk Line

Depending on the ship size, speed and fuel price, containership operators saw an increase of some USD 500 million in 2015 annual costs due to new sulphur requirements which are forcing owners to use higher cost fuel, considering all containerised trade in Emissions Control Areas, according to the latest report by International Transport Forum OECD.

In order to fight marine pollution, ships entering Emissions Control Areas from the Baltics to the North American coast had to switch to ship fuels with less than 0.1 percent sulphur content from 1 percent, starting from January 2015.

The report shows that the increase in costs for container ship operators on the Asia-North Europe route was fairly marginal in 2015, but could be substantial in 2020, with increases possibly up by 85%.

Furthermore, the impacts for individual shipping companies can be substantial, as Maersk Group estimated the additional costs for its total fleet, as a result of the 2015 ECA requirements, was in the order of USD 200 million.

As the global sulphur cap could go even lower to 0.50% in 2020, the reports shows a further rise in costs for container ship operators, between 20% and 85%, thus, in this most extreme case, the cost per TEU would be approximately USD 400 higher.

“Considering these effects, one could calculate the total costs for the container shipping industry related to the 2020 requirements to be in the order of USD 5-30 billion per year,” the report notes.

Maersk Group estimated that its increased costs due to the global sulphur cap in 2020 could be USD 0.5 – 3.5 billion for its entire fleet.

However, should the global sulphur cap only be introduced in 2025, costs for container ship operators could increase between 4% and 13%, mainly attributed to the sulphur cap of 0.50% that would be introduced in EU waters.

“In such a case, the demand for low sulphur fuels would be much smaller and the transition period for building up more low sulphur fuel refinery capacity longer, so the price differential is likely to be much smaller than in 2020,” OECD added.

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