1. IMO 2020 AND its Impact
IMO 2020 regulation effective 1st January 2020 (International Convention for the Prevention of Pollution from Ships (MARPOL)
IMO 2020 is the first regulation in a series of steps by the International Maritime Organization (IMO) to reduce emissions in response to climate change. IMO2020 requires using fuel with a sulphur content of 0.5 % or lower and will come into effect as of 1st January 2020. Ocean carriers are currently evaluating and testing three options to be compliant with the new regulation:
- converting to more expensive low-sulphur fuel oil (LSFO 0.5%)
- using Exhaust Gas Cleaning Systems (EGCSs) also called scrubbers
- deploying ships powered by liquefied natural gas (LNG)
The spread between HSFO 3.5% and LSFO 0.5% is estimated approximately at USD 250 per ton, while the installation of scrubbers is estimated at about USD 6 – 10 million per vessel. In regards to LNG, shipping lines seem reluctant to use it because of the safety risks.
It is clear that this change will affect the entire shipping industry and the cost of compliance with the new regulation will be significant. The ocean carriers, as well as the forwarders will not be able to absorb these additional costs. At this stage it is not possible to define the exact cost impact. We are in constant dialogue and negotiation with our partner carriers and we will do our outmost to mitigate the impact for our customers.
2. Routing Outlook
- Asia to Europe: An extensive blank sailing program is in place from all alliances as a reaction to the low demand and has start from wk5 and will last until end of Q1.
- Asia to Latin: Space continue to be tight to Mexico & WCSA, while ESCA is manageable. Space issues expected due to multiple blank sailings from all carriers.
- Asia to North America: Extensive blank sailings especially in to USEC.
- Europe to Asia: It looks like ocean rates remain stable resp. slightly decreasing for certain commodities and short term agreements due to the space and bunker development.
- North America to Asia: Heavy delays at several rail ramps and ports affecting export cargo. Market is stable in terms of rates. Space is tight for Oceania direct services off USWC. Pre-booking 2-3 weeks ahead recommended.
- Asia to Asia: It seems at this stage no significant changes to the FAK rates expected.
3. Did you know?
The number of major ports in Asia has climbed from 8 to 11 in 18 years, out of these 11 Asian ports 7 are in China
- European ports are the big losers as their number has reduced by half, with Hamburg and Felixstowe dropping out of the Top 15 altogether.
- Hong Kong is also suffering. Throughput has declined in 7 out of the last 10 years since its peak of 24.49 mTEU in 2008. Hong Kong International Terminals (HIT), Modern Terminals (MTL), COSCO-HIT Terminals (CHT) and Asia Container Terminals (ACT) have therefore announced on 8 Jan the formation of the Hong Kong Seaport Alliance, a joint operating agreement aimed at combating the decline in container volumes.
Reference: ‘ALPHALINER Volume 2019, Issue 1-13’ Please always contact your Gebrüder Weiss Representative to discuss specific ocean rate topic.
