New Drewry Analysis of ECA Shipping Costs

Extra costs will depend on the size and fuel efficiency of containerships

For deep-sea container carriers, switching to marine gas oil (MGO) to comply with new sulfur limits in Emissions Control Areas (ECAs) will add $29 to $49 per twenty-foot equivalent unit (TEU) to the cost of trans-Atlantic shipping, according to a new analysis by Drewry Maritime Advisors (Drewry).

For voyages between Northern Europe and the U.S. East Coast, the analysis puts the extra cost at about $29 per twenty-foot equivalent unit (TEU), while the cost for trips that continue into the U.S. Gulf Coast, the extra expense rises to $49 per TEU.

"The industry must look more closely at the cost impact of the low-sulphur regulation, so that carriers and shippers can negotiate and manage the cost increases in good time," Drewry said.

Currently, MGO costs about $300 more per tonne than heavy fuel oil (HFO) with 1 percent sulfur content, but the calculations assumed that increased demand for low-sulfur fuel will push the differential to $320 in 2015.

The extra shipping cost for various vessels depends on variables including sailing time spent in ECAs, per-unit fuel consumption, timing of the switch to MGO during the voyage, extra wear and tear on ship engines caused by the use of MGO, and future cost differentials between fuel oil and MGO.

Other related effects of the ECAs could include fewer vessel calls to ports within the areas, a move away from upriver ports that require more time sailing, and increased market advantage for larger, more fuel-efficient ships.

Drewry notes that most deep-sea ships will switch to MGO while sailing within ECAs rather than install scrubbers or switch to liquefied natural gas (LNG).

"Although some deep-sea ships are now being ordered with duel LNG/HFO fuel engines, the loss of cargo space required for their fuel tanks is enormous, and major cities are still reluctant to see fuelling stations for hazardous gas like LNG built in nearby ports," Drewry said.

"Ship exhaust scrubbers may also rule the world one day, but few, if any, container ships have them installed yet."

An analysis presented last month by Drewry Supply Chain Advisors director Philip Damas put the differential for Asia-Europe voyages at $100 to $120 per TEU.