Sulphur Premium May Cause Freight Switch to Road Haulage as Container Shipping Lines add Surcharges

WORLDWIDE – Following last week’s announcement by Rickmers-Linie regarding the implementation of a Low Sulphur Fuel Surcharge for freight shipping after the turn of the year there have been more announcements of similar moves by both short sea and intercontinental container shipping lines. The latest release from a company serving the European market has already prompted cries that any significant rise in short sea costs may well see a switch to road haulage options on some routes.

Feeder specialists Unifeeder has decided on a €65 per TEU surcharge for cargoes travelling in the affected English Channel and Baltic Sea areas. In Northern Europe, Unifeeder vessels operate exclusively in the Sulphur Emission Control Area (SECA) and the new legislation will therefore have a direct impact on the type of fuel the company can use. Effectively, Unifeeder says it must switch from using traditional low sulphur Intermediate Fuel Oil (IFO LS) to Marine Gas Oil (MGO) in order to ensure the required reduction from 1.0% to 0.1% sulphur content. This currently comes at a cost premium, as the more environmentally friendly MGO is approximately 50% more expensive than the current low sulphur IFO, hence the surcharge.

Long term of course the aim is to switch where possible to cleaner burning fuels, such as liquefied natural gas (LNG) and ethane but this will be a long term strategy and now Mediterranean Shipping Company (MSC), with the world’s second largest container fleet, has issued notice that it too will be recovering the extra costs via an Emission Control Area (ECA) surcharge from 1st January 2015 on the affected routes, having calculated the amounts concerned by trade and by container, with specific levels of surcharge to be shown on the MSC website.

Doubtless the next few days will produce a rash of such notices from shipping companies, large and small, with the areas affected including the Baltic and North Seas, the English Channel, and the North American waters including 200 nautical miles from the US and Canadian shores, as detailed here two years ago this week.