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IMO 2020 sulphur cap risks bankruptcies for box lines: BIMCO analyst

THE London-based Baltic and International Maritime Council (BIMCO) has warned that a failure by shipping lines to pass on increased fuel costs from the IMO 2020 sulphur cap could result in bankruptcies, reports Colchester's Seatrade Maritime News.

In his latest outlook report for container shipping Bimco analyst Peter Sand warned of a tough year for the mainline container trades with a number of pitfalls ahead including the impact of the Sino-American trade war and signs that the Europe containerised market is "saturated".

"Nevertheless, the dominant theme of 2019 will be the sharing of the higher costs that are expected in various forms towards the end of the year, as the starting line for the IMO 2020 sulphur cap approaches," the report from Bimco said.

Whether container lines opt to use low sulphur fuel oil or fit scrubbers to continue using high sulphur fuel oil after January 1 2020 they will face significantly higher costs per unit. Last September the third largest container line CMA CGM estimated the additional cost to be US$160 per TEU on average as result of complying with the sulphur cap.

A failure by lines to recoup these costs from shippers could be disastrous Mr Sand warned. "Unless these costs can be passed on to the end consumer through the whole supply chain, profit margins in the container shipping industry will be reduced everywhere; a failure to recover the extra fuel costs in full may even result in outright bankruptcies in the container shipping industry."

"The ability of the container shipping industry to pass on these increases depends greatly on its negotiating power and a fundamentally strong freight market," Mr Sand said.

Source: Schednet

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