Shipbrokers anticipate fuel cost increase in 2020

Posted on 22 June 2018

Source: Kallanish

Dry-bulk freight costs could rise in the 2020 time-frame as steady demand meets political disruptions and environmental legislation, according to Simpson Spence Young (SSY) director Derek Langston.

Langston told delegates Thursday at the Kallanish Europe Steel Markets 2018 conference that shipbrokers like SSY have already seen a great deal of volatility in 2018 due to a variety of factors. These included government intervention, weather woes, coal market issues, and more.

The volatility should moderate in the second half of the year due to positive trends in the industry as a whole, Langston says.

"Of course, hanging over this is the threat of trade wars and the negativity that can bring," he adds.

United Nations-mandated sulphur emission standards set to kick in on 1 January, 2020, however, will likely force prices to rise as carriers opt to either switch to low-sulphur blends or install scrubbers. Sulphur emissions must fall from the current standard of 3.5% to just 0.5%.

Complicating the issue is the relative age of the carrier fleet. Outfitting older vessels with more environmentally friendly equipment will take money and time out-of-service, Langston says.

Hard numbers are difficult to predict due to the large number of moving parts involved and the limited ability of carriers to pass along their fuel costs. It is very likely however that prices will rise by a substantial margin, the freight specialist adds. 

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