As the clock winds down towards the IMO 2020 deadline you don’t need Drewry to tell you that it is going to be a pivotal year for the carrier industry. Failure to recover more of the fuel cost from customers than in the past (estimated to be around 50%) could be ruinous for some lines, many of which are still operating with highly distressed balance sheets.
In February, Drewry Supply Chain Advisors released a whitepaper (IMO 2020 Low-sulphur Regulations) offering some pointers to shippers regarding the new fuel regulation to use in their contract discussions with carriers, and previously launched an IMO 2020 Cost Impact Calculator to assess the ramifications.
From what we hear, there is a general acceptance among shippers that they will have to pay more towards the fuel cost burden, although there are still a number of sticking points regarding the mechanics of how it should be done.
On the other side of the table, carriers will argue that a short-term win for shippers could quickly turn into a loss. It is something that shippers might want to consider during negotiations as any cost saving today might raise the likelihood of another carrier bankruptcy in the manner of Hanjin Shipping, causing unwanted chaos in the supply chain and further reducing the competition, thus increasing the risk of much higher rates at a later date.