Hapag-Lloyd Gives Details of its IMO 2020 Bunker Surcharge

Hapag-Lloyd’s MFR will replace all its previous fuel charges. Image Credit: Hapag-Lloyd

Hapag-Lloyd today announced details of the new bunker surcharge mechanism it will use to recover the cost of complying with the upcoming IMO 2020 sulfur cap.

The carrier, with 7.1% of market capacity by TEU according to Alphaliner, hopes its Marine Fuel Recovery (MFR) mechanism will offset the expected $1 billion in additional costs it expects to face.

"We have developed a system that enables a calculation of costs for our customers that is causal, transparent and easy-to-understand – and that shows our customers just how high the additional costs of using low-sulphur fuel are," the carrier says.

"The MFR mechanism will be reviewed quarterly or monthly in case fuel price fluctuations are above USD 45 per tonne and takes into consideration various parameters, such as fuel costs, vessel size (basis: Market-class vessel), vessel utilization and route length."

The MFR will be calculated as follows:

MFR calculation. Image Credit: Hapag-Lloyd

Hapag-Lloyd's MFR will replace all its previous fuel charges and, like its peers, will be gradually implemented beginning January 1, 2019.

"Hapag-Lloyd welcomes the new regulation and views it as an important step towards setting uniform standards that will benefit both, the environment and people," the carrier says.

"At the same time and on the assumption that the spread between high sulphur fuel oil (HSFO) and low sulphur fuel oil (LSFO 0.5%) will be 250 US-Dollars per tonne by 2020, Hapag-Lloyd estimates its additional costs being around 1 Billion US-Dollars in the first years."

Hapag-Lloyd reported a bunker consumption of 2.2 million metric tonnes (mt) for the first half of 2018, of which 12% was low-sulfur material.

Ship & Bunker data indicates the current premium for low sulfur distillate bunkers in major ports is currently around $250/mt.