New SULFUR Regulation as of January 1st, 2020

DSV will implement new surcharges in 2019 in order to offset costs from a new sulfur regulation. Read on for more details.

Ocean transport has a large impact on the environment, and the industry is looking for new ways to reduce emissions and lower that impact. One large containership can produce as much sulfur as 50 million cars, and over 90% of global trade travels by sea. Electric ships could be a reality in the near future, but for now, the International Maritime Organization (IMO) is looking to cut sulfur emissions with a new fuel regulation.

Currently, the most commonly used fuel, IFO380, contains up to 3.5% sulfur, but under the new regulation, which will be implemented January 1st, 2020, only fuels with a maximum of 0.5% sulfur (LSFO) will be allowed.

Overall, the higher price on LSFO is estimated to trigger additional costs in the range of $10-15 billion per year for container carriers. To be compensated for the higher costs, carriers will move away from so-called ‘all in rates”.

Carriers are currently in the process of calculating various new fuel surcharges, most of which will be applied in the beginning of 2019. Some will occur quarterly and others with monthly adjustment mechanisms.

We thank you in advance for understanding that DSV cannot absorb the higher costs, so we will add a new BAF during 2019. Once all carriers have published their new BAF models, we will evaluate the situation and release more information to our customers.

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