Carriers, shippers brace for serious bunker cost shock next year
EXPECT a bunker cost shock next year when UN-mandated emissions control areas (ECA) demand costly low-sulphur fuel - US$1,000 versus $600 a tonne, says Seattle-based research house, Mercator International.
"The requirement to burn 0.1 per cent sulphur from January 2015 will significantly impact the single-greatest expense on ocean carriers' income statements," said Mercator analyst Derik Andreoli.
The most effective way to control these costs is by maximising the time spent on the open ocean relative to the time spent in ECAs by adjusting one's ports of call, he said.
"Some shippers may choose to adjust their supply chains, and rising operational costs may also drive carriers to alter their networks to reduce days spent in the ECAs," said Mr Andreoli.
"From January, carriers will be required to burn fuel with a sulphur content no higher than 1,000 parts per million (0.1 per cent) in North American, North Sea, Baltic Sea, and Caribbean ECAs, as opposed to the current limit of one per cent," he said.
"The risk to ports and terminal operators should not be underestimated. Carriers will be looking to adjust schedules and rationalise ports of call to reduce time spent in ECAs," said Mr Andreoli.
"The cost of calling at southern ports located on the US east coast from Panama to New York will become far more expensive," he said.
"Some carriers may decide to route one or more Asia-US east coast all-water strings directly from Panama to Norfolk/New York instead of calling one of the more southern ports," he said.
Worst hit will be the transatlantic trade as more of it is in ECAs. "Time spent in ECAs compared to time spent on the open ocean is much greater for the typical Europe-US east coast service, versus the typical Asia-California string," he said.
Vessels operating in an ECA 35 per cent of the time, are expected to face a 23 per cent increase in fuel prices, said Mr Andreoli.
"If, as history suggests, prices increase 20 per cent, the total fuel expenditures for the same string will likely rise by 33 per cent," he said.
While vessels that only spend eight per cent of the time steaming in an ECA, the fuel expenditure would increase six per cent if fuel prices remain unchanged, and 11 per cent if they went up.
