Market to decide shipper bill for IMO 2020

Date: Wednesday, October 30th, 2019
Source: Freight Waves

Shippers and container lines will likely settle the “who pays how much” dilemma of new low-sulfur IMO 2020-compliant fuels in much the same way as they agree on freight rates: They will simply negotiate a price both parties can live with.

That is the view of a growing number of market and fuel experts as box shipping stakeholders face the estimated $11 billion bill due next year because of the introduction of low-sulfur fuels that become mandatory under International Maritime Organization rules on Jan. 1.

Patrik Berglund, CEO of Xeneta, an Oslo-based ocean freight rate benchmarking and market analytics platform, sees no precedent to suggest lines will succeed in billing customers for the full higher cost of the new low-sulfur bunkers. Rather, he believes the market will determine who pays how much.

He argues that oil prices are currently not at historically high levels while ocean freight rates in the current slack season are tumbling on key trades.

“I think the notion of increased costs to run operations for carriers, equals increased rates for shippers, is flawed,” he said. “There’s no historical evidence to support this.”