2020 Global container shipping outlook
Container lines are facing growing pressure to standardise surcharges, which have become ever more complicated with the introduction of IMO 2020, the IMO’s 0.5% sulphur cap on fuel content effective January 2020, a report entitled “2020 Global Container Shipping Outlook” by Alix Partners found.
The bunker adjustment factor (BAF) has become even more complex with the introduction of IMO 2020, with each line having its own variation on a basic formula covering a range of areas including fuel price, ship size and trade. “The lack of transparency and standardisation of those variables is a constant irritant to shippers, freight forwarders and NVOCCs. It gives rise to the suspicion that some carriers are using the BAF as a revenue-raising tool as well as a cost-recovery and risk-sharing mechanism,” the report highlighted, adding that “the uncertainty can lead to tense relationships that take a toll on both sides and add to the headwinds the container shipping industry faces.”
As demonstrated by the report, there is no standard BAF formula in use across the board, nor is there any widely recognised mechanism to account for the effects of the various sulphur reduction methods on the type of fuel used and the amount consumed. According to Alix Partners, the frustration with the opacity around BAF charges will likely cause some of the shippers, freight forwarders and NVOCCs to propose their own formulas and press for adoption, thus driving the movement towards transparency and standardisation.
Moreover, the pressure of IMO 2020 is now being further compounded by the influence of the coronavirus, the report recognised. “IMO 2020 was already going to make this a year of huge disruption for the entire maritime industry,” said Mr Marc Iampieri, the Managing Director for Transportation and Infrastructure at AlixPartners. “Throw in the coronavirus, the recent deterioration of some key financial measures and whatever other unforeseen disruptions lie ahead, and it is clear that preparing for the worst may be the best way to avoid the worst,” he emphasised.