Here at JORI International Ltd., we care about your business and we strive to keep you informed with the latest news.
Starting January 1st in 2020, new regulations by the International Maritime Organization (IMO) will have a profound impact on your shipping and freight bill. What this entails is that it basically means the entire shipping industry can’t use the cheapest source of fuel, and will have to switch to more environmental friendly and significantly more expensive fuel.
There are essentially 2 ways of dealing with this new change:
New engines which clean the exhausts of the cheaper fuel (massive capital investment, and takes a vessel out of service for 6months); or
Burn the more expensive fuel.
Long story short, this is a massive cost to steamship lines, which they will invoice on as this cost is currently higher than their margins per container. There are a lot of estimates out there about the cost per container, but the truth is that nobody really knows the true impact yet. In fact, certain carriers are actually already charging a LSF surcharge even though the policy isn’t active until 2020.
What is clear is that if you work on your budget for freight for 2020 you will have to account for higher costs. In addition to that, the impact might not only be limited to your ocean shipments. It can be expected that prices at the pumps will increase as well, since refinery capacity is insufficient to deal with this new regulation. Thus impacting your trucking rates too.
For more details on the IMO Sulphur Regulation 2020: http://www.imo.org/en/MediaCentre/HotTopics/Pages/Sulphur-2020.aspx
Account Manager, Freight
Business Analyst & Digital Marketing, Information Technology