More profitable second half helped Hapag-Lloyd stay in the black
Hapag-Lloyd’s net profit came in at $54m last year after the carrier recovered well from ...
Hapag-Lloyd has rolled out its plans for recovering the extra cost of compliance with the IMO’s 0.5% sulphur cap for shipping, which comes into force in less than 15 months.
It no doubt hopes its proposals will be better received by customers than those of its rivals – slammed by suspicious shippers as “lacking transparency” and “blatant profiteering”.
Hapag-Lloyd estimates the annual cost of compliance with IMO2020, from 1 January 2020, for its fleet of some 220 containerships will be in the region of $1bn.
The carrier is proposing a ‘marine fuel recovery’ (MFR) mechanism, to be “gradually implemented” from 1 January next year to replace all current fuel-related surcharges.
“With our MFR, we have developed a system for our customers that we think is fair, as it allows for a casual, transparent and easy-to-understand calculation of fuel costs,” said chief executive Rolf Habben Jansen.
He has long been advocating the use of low-sulphur fuel oil (LSFO), to comply with IMO 2020, rather than the installation of exhaust gas cleaning systems (scrubbers) that enable ships to continue to burn cheaper heavy fuel oil (HFO).
However, in more recent statements, Mr Habben Jansen has conceded that the carrier might consider fitting some of its inherited “LNG-ready” ships from UASC to run on gas, as well as to trial scrubbers on some other vessels.
Today, Hapag-Lloyd confirmed it would conduct trials next year with one LNG-converted vessel and two ships fitted with scrubbers.
It said its MFR would be based “on a set of variables and average market data”, which would relate to the price of low-sulphur fuel combined with the variables of containers carried per round trip of a “market class vessel” based on Clean Cargo Working Group data for a specific trade.
The carrier provided some examples: an MFR of $182 per teu being applicable to a container shipped from Asia to North Europe at a fuel price of $400 per ton. Hapag-Lloyd is assuming that the spread – the difference between HFO and LSFO – will be about $250 per ton. The current spread is about $230 per ton with HFO at $480 and LSFO at $710.
With its proposals for IMO 2020 only published today, it is too early to gauge the reaction of customers.
A recent survey conducted by Drewry found that only 13% of shippers polled had received information from their carriers on their fuel cost recovery plans.
And worryingly for carriers, the same survey revealed that less than 50% of shippers believe the current proposals for recovery were “sufficiently fair and transparent”.
Drewry said carriers would need to be “far more transparent on the cost inputs than they have been previously if they are to convince shippers otherwise”.
But, “things could get quite messy”, acknowledged the consultant, given that the fuel cost structures of differently powered ships could be “widely divergent”.
“There is a clear need for carriers to have a robust system in place to enable them to recover the additional costs associated with the IMO 2020 rules, but equally, lines must appreciate that without sufficient transparency to customers the chances of successfully recovering those costs will diminish,” said Drewry.