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The new global sulfur caps imposed on January 1, 2020 will become the best opportunity for the shipping market to drive freight rates.

Although there are still people discussing whether shipowners really consider the use of scrubbers and the advantages of doing so, major shipowners and operators seem to think that these will drive freight rates up.

Huaguang Shipping CEO David Palmer said that operators may face the prospect of a sharp decline in revenue, and may even suffer from the forced use of expensive low-sulfur fuels. He said: "I think the answer is that the cost of the fuel surcharges we will buy will eventually be passed on to the end users. This is not just the extra cost of buying a scrubber and maintaining it, but also a lot of undetermined results."

According to past experience in the operation of multi-purpose vessels and regional container ships, Martin Cresswell, the director of the Taikoo Steamship fleet and the current technical director of the Hong Kong Shipowners Association, said that “the answer to the multi-purpose vessel and feeder container ships is the well-known fuel surcharge adjustment factor.” Martin Cresswell pointed out that these factors are not present in bulk carriers and tankers, and the problem is even more serious. “They will have to pay the extra cost of the customer by shipping, which will take some time.”

Martin Cresswell warned, "I think this is a very serious problem. They have to pay extra shipping costs. You can make many companies go bankrupt. If they can't afford the fuel costs, you may see many companies in a very difficult situation. ”

Bjorn Hojgaard, CEO of Anglo-Eastern, stressed that 98% of the world's ships need to burn more expensive low-sulfur fuels. “If the cost becomes expensive enough, what we saw before will happen, including the slow start of the ship. As a result of the increase in shipping and freight rates, freight rates will rise as a result of the need to supply the market."

Bjorn Hojgaard added that refineries and refueling ports may be required for mobile refueling and lubrication, and shipping demand for these products may increase, which will also drive freight rates up.

Although Bjorn Hojgaard acknowledges that there is some volatility in the shipping industry, and that airlines and their customers feel better about the market, Roberto Giannetta, secretary general of the Hong Kong Federation of Freight Transport, points out that with the recent company integration, the status of shipping companies will be stronger than they were three or five years ago. .

Mats Berglund, CEO of Pacific Shipping, pointed out the grim reality of the market and emphasized that fuel costs are basically a pass-through cost in the dry bulk and oil shipping markets. He said: "As long as most fleets use low-sulfur fuel, the market will adjust."

Berglund stressed: "This is a great opportunity to tighten the market." He pointed out that because ship owners and operators adjust according to fuel prices, there may be significant differences depending on fuel prices. This will reduce the average speed of the fleet and significantly tighten the balance between supply and demand.

Berglund acknowledged that the impact of these small vessels on Pacific shipping operations was not obvious, but Berglund insisted: "We don't want it to happen, we don't think it will happen on small handysize ships, but it can happen on very large ships." Berglun concluded by summing up, "We have to do our thing and create the best results for our shareholders, but we obviously won't take the lead in using the scrubber."

Source: International Ship Network