IMO Sulfur Regulation Impact on 2019 Freight Contracts

2019-01-28T19:04:31+00:00October 25th, 2018|Export, Freight Market, Import, Shipping News|

As the holiday shipping season peaks in advance of New Year tariffs, international shippers are already examining the market for the significant upcoming ocean carrier contract season. Effective January 1, 2020, an international cap on sulfur emissions from bunker fuel will add substantial costs to ocean carriers before existing beneficial cargo owner (BCO) contracts, negotiated this April 2019, expire.

Under the new requirements, ships will have to use fuel with a sulfur content no higher than 0.5% (a drastic change from the current 3.5%) or contain equipment to clean its sulfuric emissions, known as a ‘scrubber.’ Vessels failing to meet the standard will be declared ‘unseaworthy,’ lose insurance coverage, and face fines & penalties.  This week, the International Maritime Organization (IMO) rejected an experience-building phase (EBP) proposal that would have allowed waivers for vessels servicing ports without low-sulphur fuel and reinforced the upcoming implementation mandate.

Fuel price fluctuation already aggravates market pricing, so how will the additional $160/TEU anticipated impact cost bode for shippers and carriers? Importers and exporters across all modes should take care to think about this in their upcoming supply chain strategy.

READ: 2020 IMO Fuel Sulfur Regulation: What Shippers Need to Know

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