Drewry: 2020 Rule Exposes Lack of Fuel Cost Transparency Concerns

The IMO’s upcoming 2020 global emissions regulation is rising considerable unease among global shippers/Beneficial Cargo Owners (BCOs) and freight forwarders, a survey by shipping consultancy Drewry shows.

Particular uncertainty and concern was expressed about carriers’ methods of fuel cost recovery with more than half of all respondents (56%) stating that they did not consider their service providers’ existing approaches as either fair or transparent. Furthermore, 4 in every 5 of the shippers/BCOs participating in the survey stated that they had yet to receive clarity from their providers as to how the widely anticipated future fuel cost increases, set to accompany the 2020 regulatory change, would be met.

Despite the significance of the change, a surprisingly large proportion (33%) of respondents to the Drewry survey admitted to having poor or very poor awareness and understanding of the new regulation.

“The level of uncertainty today as to the total cost impact is so large that nobody is able to provide a confident forecast of the cost of compliance; the only certainty is that the extra cost will run into billions of dollars globally come 2020,” Drewry said.

Based on independent “futures” prices, low-sulphur marine fuel prices per tonne will be 55% higher than current high-sulphur fuels and Drewry considers that the probable “worst case” scenario is that fuel costs and fuel surcharges in global container shipping will increase by 55-60% in January 2020.

“The IMO low-sulphur rule change represents a very significant, industry-wide, change event which will likely have far reaching effects on the global shipping industry for many years to come,” Philip Damas, Head of Drewry Supply Chain Advisors, said.

“Given the scale of the extra costs triggered by the new regulation and the carriers’ expectations that their pricing and fuel charge mechanism with customers must be restructured, there is a need for carriers to address the transparency concerns expressed by their customers.”