Shippers condemn carriers' approach to IMO 2020

Date: Friday, May 3, 2019
Source: Lloyd's List

ESC claims lines are imposing low sulphur fuel costs on shippers rather than jointly working to make container shipping supply chains more sustainable

The Emergency Bunker Surcharges introduced by container lines last year are casting a long shadow on negotiations  between shippers and carriers on how to pay the higher cost of low sulphur fuels ahead of the IMO 2020 regulations which enter into force next year.

Container lines were accused of profiteering and price signalling by some forwarders and shippers last summer when they introduced a range of Emergency Bunker Surcharges in the second quarter following a rise in the price of oil and after most had recorded substantial Q1 2018 losses.

Despite lines facing a $10-15 billion increase in fuel costs next year due to the global implementation of new IMO low-sulphur fuel regulations from the start of 2020, shippers are wary of liner proposals to pass on costs to customers following their experience with EBS last year, according toRogier Spoel, air freight policy manager at the European Shippers’ Council (ESC).

“When the emergency bunker surcharges were put in place last year almost every carrier implemented them at the same time and there wasn’t really grounds for them,” he told Lloyd’s Loading List. “Yes, there was a rise in oil prices, but it wasn’t like there was an oil crisis in the Middle East. There was one small spike and then they fell back but the EBS remained.

“That gave shippers the understanding that we really have to pay more attention in the future.

“So, yes, shippers are wary, and that negative sentiment is flowing through to low-sulphur. They don’t want to be screwed by lines on the new IMO rules after their experience with EBS.”

Liner efforts to recoup the cost of the new fuel before it is in use have already been heavily criticised by the British International Freight Association which described sulphur surcharges as “unjustified and blatant profiteering” last year.

Spoel said that while shippers were fully supportive of the sulphur emissions reduction aims of IMO 2020 and were keen to pay towards their implementation, liner efforts to introduce sulphur charges when it was still unclear how much the new fuel would cost were unwelcome.

“We all want cleaner transport, which at the end has a price ticket,” he said. “I think that the actual cost is not really the issue. It’s more the way surcharges are being forced on the market by carriers. We would like a more coordinated effort – we need to talk to one another and see what’s the best way to get the total support of the shipping community behind it.

““Of course, we understand that carriers will pay the bill before it trickles down towards shippers, so we understand that carriers have the biggest risk. But it’s an automatic fallback option for the carriers to just lay it on the shippers and say well here you go, that’s it.”

He also called for a more coordinated approach to container shipping sustainability. “Shippers would be happy to go on a customer journey with lines to better understand what they are doing and the challenges they are facing and what kind of projects they are rolling out on sustainability - whether they’re building new ships or retro-fitting them with scrubbers, or working on biofuel programs, for example,” he said.

“Shippers want to get past how much environmental initiatives will cost them and understand how they can help and support lines.

“We don’t want to hear ‘you have to pay more because of the IMO rules.’ We want to hear ‘we’re paying this surcharge because we are renewing our fleet, we are retrofitting ships with scrubbers.’

”We want to have a total view of what kind of CO2 reductions they are putting forth. All this needs better communication.”

He said ESC was now working with analysts at Drewry to formulate a system for fairly implementing IMO 2020.

“It’s always easy to say from a shippers’ perspective you’d like more transparency,” he said. “But that’s easier said than done because you’re dependent on carriers and there are different alliances with different carriers who all have different systems. And they all incorporate it in a different way.

“We are working with Drewry on creating a dashboard to collate data on fuel costs so we know how much we should be paying on each trade.

“We always feel uncomfortable when lines communicate the actual surcharge per container. It feels like they are informing other market players and then, like with EBS, they all have the same level.”

“With Drewry we aim to get more insight.”

 

Read from the original source.

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