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Expert: Carriers could start low-sulfur ges by October
American Shipper
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Ocean carriers could start increasing fuel surges as early as Oct. 1 to help pay for the higher cost of low sulfur fuel under a mandate by the International Maritime Organization (IMO) that will take effect Jan. 1, Mohawk Global Logistics Vice President of International Transportation Rich Roche said Tuesday.

Low-sulfur fuel will start being stored aboard vessels as early as three months before the IMO requirement activates, he said.

“They don’t necessarily have to burn it, even though they’re bringing it on board the vessels,” Roche said. “Don’t let anyone fool you that just because it’s on board means they’re burning it. They have many tanks where they put the fuel on vessels, and they’re actually storing it until they have to burn it.”

Price impacts of the IMO mandate will be “quite large,” ranging anywhere from $200 per TEU to $400 per TEU, he said.

“There’s a lot of variables that will go along with the calculation, and all of those variables are going to be specific by carrier, because they’re all coming up with their own formula,” Roche said. “Some of that’s quite subjective. So, it’s one of those things you need to be prepared for.”

During a webinar last week, analysts from AlixPartners estimated that container carriers would have to increase their bunker adjustment factors by 40 percent or $270 per 40-foot container on Asia-to-Europe services and by 33 percent or $150 per 40-foot container on eastbound transpacific services to maintain margins when they shift to low-sulfur fuel oil.

Speaking later during the conference, Rebecca Dye, a commissioner on the Federal Maritime Commission (FMC), said while her agency primarily focuses on competition enforcement and has no direct role in implementation of IMO rules, “if an IMO rule seriously affects freight rates and service levels, I would not be surprised if the commission ... becomes a part of the process.”

Concerns associated with the low-sulfur fuel mandate include service disruptions, impacts of higher costs, and fuel surges, Dye said.

“Will enough low-sulfur fuel be available when and where it’s needed, and if so, at what cost?” she asked. “Also at issue is will the move to low-sulfur fuel result in higher costs for other low-sulfur distillates, like heating oil?”

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