Drewry: ECA Cost Impact is "Virtually Zero"

by Ship & Bunker News Team
Tuesday February 17, 2015

Extra costs which were widely expected to occur with the introduction of tougher Emission Control Area (ECA) sulfur regulations on January 1, 2015 have so far failed to materialise due to the curent low cost of bunkers, with Drewry saying in its 2015 week 7 container insight that the fiscal impact has been "virtually zero."

It had been thought that additional low-sulfur surcharges would be necessary to help companies offset the cost of switching to more expensive lower sulfiur fuel.

However, according to Drewry data, Bunker Adjustment Factors (BAF) began declining in the last few months of 2014 and have continued to decline in January 2015, a drop that has in effect led to no extra costs.

"Given the scale of the decrease in the BAF cost component on the Asia-Europe route, a nominal increase of $20/teu linked to the low-sulphur fuel was immaterial," said Drewry.

It was also noted that underlying bunker prices fell by 44 percent between July and December last year in areas outside of ECAs.

"For now, the net cost has been virtually zero," said Drewry. 

"But the real cost will be seen once fuel prices start rising again, as will inevitably happen."

Drewry added that because BAF charges typically lag behind bunker price changes, it is expected that BAFs will continue to fall in the near future.

Prior to oil's collapse last year, it had been predicted that the new ECA rules would mean BAFs would rise 20 percent, or between $100 and $120 per TEU.