News / Seago Line says European low-sulphur fuel regulations will cost it $40m a year

28/09/2015

Maersk’s intra-Europe subsidiary, Seago Line, is claiming the new sulphur oxide (SOx) ship emission regulations will cost it $40m a year.

At last week’s Container Trade Europe event in Hamburg, organised by the JOC, Seago Line key account manager Andrea Avani said the line had targeted carrying 850,000 teu this year, which would mean the new regulations that came into the force at the beginning of this year in Europe had cost the line around $45 per teu.

Mr Avani said that of the 50 vessels in the company’s fleet, 22 were employed in its shortsea mainliner business, with capacities of 1,700 teu to 4,500 teu. The remaining 28 vessels, ranging in capacity from 500 teu to 2,700 teu, operate on feeder trades.

On 1 January, the European Union reduced the allowable SOx content of vessel fuel emissions from 1% to 0.1% in three Special Emission Control Areas (SECAs): the Channel, North Sea and Baltic Sea.

He told delegates: “Twenty-seven of our vessels have been impacted by the SECA regulations, and the cost increase on the year before was about $40m – that was the figure we had to collect from our direct customers [shortsea shippers] and business customers [deepsea carriers that buy Seago feeder services].”

Mr Avani said all vessels transiting the SECAs were burning low-sulphur marine gas oil (MGO) rather than using scrubbers, and in response to the new legislation it had introduced carefully calibrated low-sulphur surcharges (LSS) for three areas: north-west continent & the UK; Scandinavia & Poland; Russia & the Baltics.

“Have we been successful in collecting these surcharges? Not hugely,” said Mr Avani. “For example, we had some success on intra-European cargo from North Europe to the Mediterranean in the first quarter, but by Q2 that was eroded by competitors not deploying dedicated assets.

“On the northbound route, we had no success whatsoever; but our intra-North Europe customers have universally accepted the LSS. One of the main reasons for this is that most competitors also introduced the surcharge and customers have been more mature and willing to contribute,” he added.

However, Mr Avani also admitted that on some trades – principally the trunk Russian container import supply chain routed through St Petersburg – other factors, such as economic sanctions and the declining value of the rouble, had masked the direct impact of the new SOx regulations.

He also took the opportunity to reiterate shipping industry claims that the regulations had distorted competition between transport modes, and he called for the ‘playing field to be levelled’.

“One of Seago’s founding pillars was that we would win conversion cargo, but the overall industry competitiveness has decreased compared with road. Am I optimistic? Not really, we need to find a more balanced approach to environmental legislation and it needs to include other modes,” he said.

In addition, he expressed concern over the lack of enforcement of the regulations, after Per Holmvang, project director of environmental protection technologies at class society DNV GL, had revealed that just 1% of commercial vessels sailing in the SECAs were expected to be inspected for compliance.

“We have complied with the regulations from day one and have since had 7,000 sailings in the SECA areas. The fact that we haven’t had a single inspection seems to me to be wrong – where is the enforcement of this regulation? Is it really protecting the environment as it is supposed to?” Mr Avani asked.