While 2018 was a turbulent year for the container shipping industry, it might have been “only a warm up for 2019” in the view of New York headquartered management consultancy AlixPartners LLP. The firm warns that IMO 2020 regulations could cost containership operators as much as $10 billion globally this year and says “that cost could increase significantly in 2020.”
In its 2019 Global Container Shipping Outlook, the firm says that, to a large extent, carriers’ financial fortunes depend on whether they will be able to recover any additional IMO 2020 related fuel costs through surcharges or whether they will have to bear at least a portion of those costs themselves.
“According to our analysis of large carriers that publish bunker adjustment factor (BAF) rates (tracked by maritime research consultant Drewry), carriers plying the Asia–Europe route in 2018 would have had to increase their BAF rates by 40%, or $270 per forty-foot equivalent unit (FEU), to achieve the same financial result; carriers working the EBTP route would have needed to increase of 33%, or an additional $150 per FEU,” says AlixPartners. “Carriers will have to impose significantly higher fuel surcharges in 2019 and beyond to maintain their margins, with no guarantee that those charges will stick or that they’ll be able to realize recovery in a timely manner. Failure to do so will depress cash flow significantly.”
AlixPartners estimates that the new fuel rules could expose carriers to as much as $3 billion in additional costs on the EBTP and Asia–Europe routes alone, which account for about 20% of container-shipping trade volume. The industry as a whole could be looking at as much as $10 billion in additional exposure, based on 2018 prices.
“And if tight supplies of LSFO trigger higher prices,” says the firm, “fuel costs could climb even higher, making the difficult task of cost recovery even more urgent.
Read the AlixPartners 2019 Global Container Shipping Outlook HERE