Results of a survey conducted by Drewry showed there is considerable unease among global shippers, beneficial cargo owners (BCO), and freight forwarders ahead of the International Maritime Organization’s 2020 global emissions regulations (IMO 2020), due to come into force on January 1, 2020.
The global shipping consultancy said respondents expressed particular uncertainty and concern 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.
Further, four in every five 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 IMO 2020 regulatory change, would be met.
Despite the significance of the change and the high press and media profile given to the subject in recent months, a surprisingly large proportion (33%) of respondents admitted to having poor or very poor awareness and understanding of the new regulation.
Additionally, more than half of all respondents said they had not received formal guidance on the pending changes from either the IMO or their national administration/transport ministry.
On the cost impact, 22% of all respondents believe the cost impact to their organization from the new regulation will be either significant (16%) or extremely significant (6%).
In Drewry’s view, 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.
Based on independent “futures” prices, low-sulfur marine fuel prices per tonne will be 55% higher than current high-sulfur fuels, and Drewry considers that the probable “worst case” scenario is that fuel costs (paid by carriers) and fuel surcharges (paid by shippers) in global container shipping will increase by 55% to 60% in January 2020.
Said Philip Damas, head of Drewry Supply Chain Advisors, “The IMO low-sulfur 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. 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.”
The Drewry survey drew 106 survey responses, of which 62% came from shippers and 38% were from freight forwarders. Of those polled, category and ocean freight procurement executives comprised 55%, global logistics managers 25%, and senior logistics executives 10%.
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