German shipping major Hapag-Lloyd has revealed plans to introduce an IMO 2020 Transition Charge (ITC) for short-term contracts as of December 1, 2019.
As explained, the move comes in an effort for the company to mitigate fuel price volatility and transitional operational expenses.
The introduction of the International Maritime Organization (IMO) 2020 sulphur cap as of January 1, 2020 marks a milestone for the shipping industry to reduce marine pollution and become more sustainable.
Specifically, the limit for sulphur in fuel oil used on board ships operating outside designated emission control areas will be reduced to 0.50% from current 3.5%. This would result in a drop in overal SOx emissions from ships.
“Switching from high-sulphur fuels to the new low-sulphur fuel will inevitably result in higher fuel prices in the short term. Volatility is also expected to increase, particularly during the transition period,” Rolf Habben Jansen, Chief Executive Officer of Hapag-Lloyd, said.
“Given these circumstances, we will implement the ITC to cope with the additional costs as well as to have a sustainable and transparent method of pricing our services,” he added.
According to Hapag-Lloyd, the ITC applies to freight of all kinds cargo and spot business with a validity of up to three months. Tender business will not be affected by the ITC.
With a fleet of 237 containerships and a total transport capacity of 1.7 million TEU, Hapag-Lloyd is one of the world’s largest liner shipping companies.