What is IMO 2020?
The International Maritime Organization (IMO), and agency for the United Nation made the landmark decision in 2018 for both environmental and human health that a significant reduction in the sulfur content of fuel used by ships must be reduced to 0.5% from the current 3.5%. The deadline for carriers to comply is set for set January 1, 2020. All carriers with vessels not in compliance will face fines or have their insurance invalidated.
What are the Options?
Carrier have two low sulfur options to choose from; operating vessels with marine gasoil or installing scrubbers. Marine gasoil is a fuel offering carriers lower sulfur properties, but at an increased cost over traditional diesel fuel. Scrubbers installed on vessels strip sulfur emissions, allowing carriers to use the dirtier diesel fuel, but at a price tag of $3-$6 million each.
How Will This Affect Shippers?
Unfortunately, the additional cost will be passed onto shippers in one of two ways. Method 1 – Carriers are adding a surcharge to cover the additional fuel/scrubber cost. Method 2 – Carriers are rolling the additional cost into their current bunker charges. Each carrier is different in their charges and all have taken a different approach in their surcharge levels.
When Are the Surcharges Taking Effect?
Some carriers are instituting the surcharges or elevated bunker cost effective December 1, 2019. Others will begin implementing their surcharges January 1, 2020.
How Do I Know What I Will Be Charged by the Carriers?
Mallory Alexander’s Operations Team is working with all clients to outline the charges by carrier as it applies for their shipments. Our Global Transport Team has also put together a comprehensive summary of all carriers and their IMO 2020 position. See the summary, overall and sorted by tradelane, here.
While this summary will be updated on a regular basis, due to the changing market conditions all current BAF and IMO surcharges stated are offered as a guideline only. All shipments will be subject to BAF and IMO charges valid at time of shipment.
What Happens in 2020?
For the introduction of IMO 2020 charges the carriers unfortunately initially have no common pricing format, or charge levels. Mallory Alexander’s Global Transport and Operations Teams are working to provide as seamless an implementation of these unavoidable surcharges for our clients as possible, however while we anticipate that in a short period of time the carriers will adopt a homogenized approach toward IMO 2020 pricing, it is our expectation that in the initial phase, accurately organizing charges from the carriers will be difficult.
Mallory Alexander will continue to provide updates regarding the IMO 2020 initiative on an ongoing basis in the interest of keeping our customers abreast of developments as they occur.