Global Shippers Forum Signals Pushback on IMO2020 Surcharges

Shippers are signaling that there will be tough negotiations ahead over who will pay for new IMO 2020-compliant low sulfur fuel oil (LSFO). At current pricing, compliant fuel costs roughly twice as much as the heavy fuel oil that most ships could legally burn until last week.

With the IMO 2020 sulfur limit now in effect, the Global Shippers Forum (GSF) has issued advice for importers and exporters facing new demands for surcharges from ocean carriers, which are attempting to pass some or all of the added cost of low-sulfur fuel to their customers in the form of special-purpose surcharges. Maersk, Hapag-Lloyd, CMA CGM and MSC have announced separate IMO 2020 surcharges. Others, like Chinese shipping giant Cosco, are rolling the extra cost of LSFO into their existing bunker surcharge formula.

GSF’s guidance to shippers highlights the basics of the IMO 2020 rules, but it also encourages them to challenge the basis of any surcharges to make sure they understand what they are being asked to pay for and whether it can be justified by carriers.

“With the container shipping industry in a trough of depression, the additional burden of complying with tough new rules on emissions from vessels is a necessary but unwelcome start to 2020. The shipping industry has widely assumed that the costs of cleaning up its environmental act can simply be passed onto its customers (shippers) in the form of surcharges," said GSF secretary James Hookam in a statement."Whether that will be the case will be the subject of individual negotiations over the coming months. However, shippers should be demanding clear and consistent explanations of any surcharges demanded."

“Ultimately, the industry needs to move on to a more mature pricing regime with confidential contracting and all-inclusive charges becoming the ‘new normal’. The shipping industry needs to wean itself off of surcharges, just as much as it does high-sulphur fuels," Hookam added. 

Looking forward, GSF predicted that the environmental performance of the shipping industry will come under intense scrutiny in regulatory forums in 2020. Beyond sulfur, these will include important discussions on greenhouse gas emissions and shipping’s carbon footprint. "The industry needs to demonstrate a responsible attitude to meeting the costs of its environmental responsibilities to retain the confidence of customers and regulators," Hookam said.