Low-sulphur surcharge price war likely as feeder costs soar 46-54pc
 
THE Baltic Sea feeder market is on the brink of a low-sulphur surcharge price war due to compliance with emission control area rules, which require the switch from cheap bunker to costly low-sulphur fuel in January.
 
Low-sulphur surcharges will likely run between $160/TEU to $190/TEU at a utilisation rate of 65 per cent, says Copenhagen. SeaIntel.

SeaIntel researchers in Copenhagen say the costs of the switch will exceed fines for non-compliance at US$184 million making price war a likely scenario, reported London's Lloyd's List.

SeaIntel's Alan Murphy says the analysis on feeder carriers' costs was based on sailing distance, vessel age, and vessel sizes would increase 46 to 54 per cent of the 65 feeder services operating in the Baltic.

"It is a real possibility that we will see a low-sulphur surcharge price war in the Baltic Sea feeder market, as the upcoming ECA zone regulation will add considerable costs to feeder carriers," he said.

Expenses for a vessel such as a $600 per tonne bunker price will increase from $490 million to $518 million per year from a current $335 million per year, or 46-54 per cent a year.

Even against the most stringent fines would match the savings for a trip from the English Channel to Gdansk should the vessel be caught and fined each time. For higher fines such as from English Channel to Hamburg would be six times the level of the fine.

Savings for a voyage from the English Channel to Hamburg would be six times the level of the fine the authorities would slap down.

Only a handful of Baltic states, Sweden, Norway and Finland, are to increase inspections. Of which two authorities, Swedish and Lithuanian, will perform these on the high seas.

The actual cost of penalties are lower than strict adherence to the rules, the risk of non-compliance may gain pricing power for operators against competitors.

The cost of implantation of ECA regulations could see feeder vessel owners shutting down much as was the case with ro-ros in the same area.

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