Growing unease around fuel cost transparency

That is according to a survey conducted by global shipping consultancy Drewry, which reveals that particular concern revolves around carriers’ methods of fuel cost recovery with more than half of all respondents (56%) stating that they did not consider their service providers’ existing approaches as either fair or transparent.

“At Drewry we are always keen to listen to the concerns of the market and help facilitate dialogue between stakeholders on complex subjects of common interest like the IMO rule,” said Philip Damas, head of Drewry Supply Chain Advisors.

“Given the scale of the extra costs triggered by the new regulation and the carriers’ expectations that their pricing and fuel charge mechanism with customers must be restructured, there is a need for carriers to address the transparency concerns expressed by their customers.”

Clarity needed

Worryingly, four in every five of the shippers/BCOs participating in the survey stated that they had yet to receive clarity from their providers as to how the widely anticipated future fuel cost increases, set to accompany the 2020 regulatory change, would be met.

Despite the significance of the change and the high press and media profile given to the subject in recent months, a surprisingly large proportion (33%) of respondents to the Drewry survey admitted to having poor or very poor awareness and understanding of the new regulation.

In Drewry’s view, the level of uncertainty today as to the total cost impact is so large that nobody is able to provide a confident forecast of the cost of compliance; the only certainty is that the extra cost will run into billions of dollars globally come 2020.

Based on independent “futures” prices, low-sulphur marine fuel prices per tonne will be 55% higher than current high-sulphur fuels and Drewry considers that the probable “worst case” scenario is that fuel costs (paid by carriers) and fuel surcharges (paid by shippers) in global container shipping will increase by 55 to 60% in January 2020.