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IMO 2020 to push up box ship fuel bill hike of US$12-20b


AGAINST a market backdrop of weakening demand growth and mounting operational costs, trade wars and fuel surcharges are set to dominate container line discussions in the year to come.

The start of the New Year saw the introduction of the International Maritime Organization's sulphur cap in marine fuel of 0.5 per cent that will result in a hefty fuel bill hike for the container shipping industry worldwide, and in the region of US$12-$20 billion.

The global container trade is anticipated to have risen by two per cent to 1.3 billion tonnes in 2019. In 2020, growth is projected at 4.9 per cent driven by strong intra-Asian trade but also solid growth on the main trade lanes.

The first signs of a tentative truce have emerged from Washington and Beijing with the agreement of the 'Phase One' deal that will see the delay or removal of billions of US dollars in tariffs and materialised just ahead of a fresh batch of tariffs that was scheduled to come into effect on December 15, reported London's Lloyd's List.

However, tariffs still remain on $370 billion worth of Chinese imports into the US.

After a rush of pre-tariff front loading before the January 1, 2019 tariff hike, transpacific trade has been on a downwards trajectory.

Data from the port of Los Angeles shows a 12.4 per cent year-on-year decline in volumes in November, while neighbouring west coast import hub Long Beach also suffered a downwards trend.

This year's peak season, in which carriers usually see volumes and rates go up, as retailers stock up for the holiday season, failed to gain traction.

Freight rates have largely tracked below last year's figure for most of 2019, with only a late rush at the end of the year, as shipping line efforts to withdraw tonnage, together with the effects of an early Chinese New Year and the introduction of low sulphur fuel adjustment charges, lifted prices.

Were it not for a large number of ships being taken out of service for scrubber retrofits leading to higher load factors, things would have been even worse.

However, oversupply of capacity is likely to linger over the next couple of years at least, driving down container freight rates and lowering earnings for carriers.

On the plus side for carriers, the supply side of the equation has eased, with fewer new ships entering the global cellular fleet.

Orders for new vessels in the past four years have been subdued. Despite some notable exceptions, for the most part, carriers have shied away from the yards, and have certainly avoided the rapid fleet expansion seen in the years up to 2015.

Figures from Lloyd's List Intelligence put the orderbook at 4.2 million TEU, representing 18 per cent of the existing fleet of 22.6 million TEU.

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