Home » Breaking News, Maritime » Hapag-Lloyd to implement ‘marine fuel recovery mechanism’ next year

German container shipping liner Hapag-Lloyd will gradually implement a “Marine Fuel Recovery” (MFR) mechanism from January next year to cope with higher fuel costs as it switches to low-sulfur fuel under a stricter International Maritime Organization emissions regulation (IMO 2020).

In a statement, Hapag-Lloyd said that using compliant low-sulfur fuel oil comes with an increase in fuel costs, which it said experts estimate to initially amount to up to US$60 billion annually for the entire shipping industry.

It said that assuming that the spread between high-sulfur fuel oil (HSFO) and low-sulfur fuel oil (LSFO 0.5%) will be $250 per tonne by 2020, Hapag-Lloyd estimates its additional costs being around $1 billion in the first years.

“Therefore, a Marine Fuel Recovery mechanism was developed, which will be gradually implemented from 1 January 2019 and replace all existing fuel-related charges,” it said.

“We embrace the level playing field and environmental improvements resulting from a stricter regulation, but it is obvious that this is not for free and will create additional costs. This will be mainly reflected in the fuel bills for low-sulphur fuel oil, as there is no realistic alternative for the industry remaining compliant by 2020,” said Rolf Habben Jansen, chief executive officer of Hapag-Lloyd.

“With our MFR, we have developed a system for our customers that we think is fair, as it allows for a causal, transparent and easy-to-understand calculation of fuel costs,” he added.

The MFR is based on a mechanism that combines consumption with market prices for fuel, Jansen explained. It takes into account various parameters, such as the vessel consumption per day, fuel type and price, sea and port days and carried TEU.

These parameters derive from a typical representative service in the market on a specific trade. The MFR also takes price fluctuations better into account, as it comes along with an improved coverage of upward and downward developments of market price changes for fuel oil. Overall, it aims for transparent calculation of costs, said the company.

Furthermore, Hapag-Lloyd said it is analyzing other technological options for reducing of emissions that might be able to cover a small share of a fleet.

“This is why trials with a LNG conversion of one ship as well as Exhaust Gas Cleaning Systems (EGCS) on two others will be conducted in the year 2019,” it said.

With IMO 2020 coming into force as of January 1, 2020, the new sulfur cap for compliant fuel oil will be lowered from 3.5% to 0.5%. This new regulation will significantly improve the ecological footprint of the shipping industry, and the majority of all vessels are expected to be operated with low-sulfur fuel oil by then.

“The new IMO2020 regulation is a major challenge for all of us, but let’s not forget that this is also a great step forward towards a more environmental friendly shipping industry,” said Jansen.

Last month, Maersk said it will introduce a new Bunker Adjustment Factor surcharge by early next year to enable its container shipping operations to recover the cost of compliance with the upcoming global sulfur cap.

CMA CGM, meanwhile, said in September it will take into account the additional cost through the application or adjustment of fuel surcharges on a trade-by-trade basis.

Photo: Hummelhummel

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