As the deadline for the enforcement of the new International Maritime Organisation 2020 Low Sulphur Regulation (LSR), which will force shipping liners to reduce their sulphur emissions by 85 per cent, draws, some foreign shipping companies have started notifying their Nigerian customers that the new fuel regime may jerk up cost of shipping starting from December 1, 2019.
In an electronic email sent out to its clients in Nigeria, leading French shipping liner, CMA-CGM disclosed that because the cost of the Very Low Sulphur Fuel Oil (VLSFO) is expected to be significantly higher than the present High Sulphur Fuel Oil (HSFO), CMA CGM will be implementing a new price reference for its short-term and long-term contracts as from December 1, 2019.
The electronic email indicated: “To comply with the IMO regulation, sulphur in fuel oil must be reduced from 3.50per cent to 0.50 per cent, in addition to the 0.10 per cent sulphur limit already effective in the Emission Control Areas (ECA). This aims to reduce the amount of sulphur oxide emissions and should have major health and environmental benefits globally, including improving air quality and reducing risks of acidification of the oceans.
“CMA CGM Group will be compliant with a mix of three solutions: using liquid natural gas-powered vessels, using advanced air quality systems onboard our vessels, and as the main solution, using compliant fuels with 0.50 per cent or 0.10 per cent sulphur.”
According to the email, the new IMO 2020 Low Sulphur Regulation will impact the global shipping industry and shipping costs are set to increase worldwide.
However, the email further explained: “For short-term contracts of three months or shorter/ validity please be informed that a new monthly charge – Low Sulphur Surcharge (LSS) – will be applied on top of CMA CGM’s ocean freight charges, effective December 1, 2019.
“For long-term contracts of more than three months’ validity, please be advised that VLSFO will replace HSFO as the price reference for the quarterly Bunker Adjustment Factor (BAF), effective January 1, 2020. The BAF is applied on top of the ocean freight charges and will still be revised on a quarterly basis with a one-month notice. Kindly note that the BAF quantum for reefer cargo will be 20 per cent higher than that of dry cargo for the same container size, with a minimum of USD25/TEU.”