Global shipping charges to rise from December 2019

Ahead of the enforcement of the new International Maritime Organisation 2020 Low Sulphur Regulation (LSR), which will force shipping liners to comply and reduce their sulphur emissions by 85percent, many of the foreign shipping companies have started issuing notification to their customers, warning that the new fuel regime will push up cost of shipping as from December 1, 2019.

In an electronic email to it’s clients in Nigeria, a copy which was sighted by the Tribune Online at the weekend, leading French shipping liner, CMA-CGM stated that because the cost of the Very Low Sulphur Fuel Oil (VLSFO) is expected to be significantly higher than the present High Sulphur Fuel Oil (HSFO), CMA CGM will be implementing a new price reference for its short-term and long-term contracts from December 1st, 2019.

According to the electronic email, “to comply with the IMO regulation, sulphur in fuel oil must be reduced from 3.50% to 0.50%, in addition to the 0.10% sulphur limit already effective in the Emission Control Areas (ECA). This aims to reduce the amount of sulphur oxide emissions and should have major health and environmental benefits globally, including improving air quality and reducing risks of acidification of the oceans.

“CMA CGM Group will be compliant with a mix of three solutions: using liquid natural gas-powered vessels, using advanced air quality systems onboard our vessels, and as the main solution, using compliant fuels with 0.50% or 0.10% sulphur.

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“The new IMO 2020 Low Sulphur Regulation will impact the global shipping industry and shipping costs are set to increase worldwide. As the cost of the Very Low Sulphur Fuel Oil (VLSFO) is expected to be significantly higher than the present High Sulphur Fuel Oil (HSFO), CMA CGM will implement a new price reference for its short-term and long-term contracts.

“For short-term contracts of validity three months or shorter, please be informed that a new monthly charge – Low Sulphur Surcharge (LSS) – will be applied on top of CMA CGM’s ocean freight charges, effective 1st December 2019.

“For long-term contracts of more than three months’ validity, please be advised that VLSFO will replace HSFO as the price reference for the quarterly Bunker Adjustment Factor (BAF), effective 1 January 2020. The BAF is applied on top of the ocean freight charges and will still be revised on a quarterly basis with a one-month notice. Kindly note that the BAF quantum for reefer cargo will be 20% higher than that of dry cargo for the same container size, with a minimum of USD25/TEU.”

Also speaking to the Tribune Online exclusively, an importer, Sylvanus Okpara confirmed that he has been receiving mails from Maersk Line and Cosco shipping as regards the IMO Low Sulphur Regulation.

In his words: “Yes, many of the shipping lines have started informing their clients ahead of the IMO Sulphur Regulation. I have received such emails from Cosco and Maersk Line, and I believe its implementation is slated for January 2020. Why CMA-CGM is starting a month ahead is what I don’t understand. But I can confirm that many of us (importers) have been getting emails, alerting us of an increase in shipping charges once the sulphur regulation comes into effect on the 1st of January, 2020.”

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