Whitepaper: IMO 2020 Regulation to Drive Freight Rates up

With fuel costs constituting over 50 percent of operating expenses already, the upcoming IMO 2020 regulation is bound to present carriers and shippers with uncertainty, Seabury Maritime said in a whitepaper published on March 4.

Produced in cooperation with Gemini Shippers Group, the whitepaper shows that what today costs approximately USD 1,600 to ship a container from China to the USEC, would cost USD 600 more after the IMO 2020 regulation comes into force.

“The 2020 deadline to reduce sulfur oxide emissions is one of the most significant regulations impacting liner shipping in recent memory,” commented Seabury Maritime vice president Nikos Petrakakos.

“With fuel costs already representing more than 50 percent of total operating expenses, the IMO 2020 poses an increase too significant for carriers to absorb and stay operational.”

The whitepaper details that the lack of industry standard for fuel-surcharges computation or a clear picture of the underlying costs for low-sulfur fuel allows participants to only roughly estimate its economic impact. Several factors affecting a carrier’s calculation of the fuel surcharges add complexity, making transparency ever so paramount to building trust on both sides.

“Through our collaboration with our partners at Seabury Maritime, we have identified the inherent risks and cost drivers represented by the IMO 2020 regulation. Our desire to add transparency to the issues will help shippers and carriers alike navigate the 2019-2020 contracting season,” Kenneth O’Brien, COO of Gemini Shippers Group, said.

“The intention of this whitepaper is to promote open dialogue between carriers and shippers by providing insight and a general understanding around metrics used behind bunker calculations,” Petrakakos added.

Read the full report here