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Maersk: Implications of the 2015 ECA sulphur regulation
7/21/2014 12:00:00 AM

From 1 January 2015 new legal requirements will come into force in the Emission Control Areas (ECA) in North Europe (Including the Baltic Sea, North Sea and English Channel) and North America (200 nautical miles from American and Canadian shore). This legal requirement will lower the maximum allowed content of sulphur in fuel burned in the ECA’s to 0.1% sulphur from todays 1.0%.

The 2015 requirements will have significant positive effects on the environmental and health in the regions nd Maersk Line fully supports such a development, subject to strict regulatory enforcement to safeguard the environmental benefits and ensure a level playing field for ship operators.

IMPLICATIONS

This requirement will have the following effects and implications for society, Maersk Line, and our customers:Environment and Health: Sulphur emissions (SOx) will be reduced by 90% which will have significant positive effects on the environment and on health in general. SOx emissions are toxic and cause respiratory implications as well as acid rain.

Maersk Line: Fuel with a sulphur content of 0.1% is significantly more expensive than fuel with 1.0% sulphur content required in ECA areas today. By 2015, Maersk Line expects to purchase 650,000 tonnes of fuel with 0.1% sulphur content annually for our fleet, equal to 7% of all fuel purchased. Based on the current price difference of USD 300 per ton (approx. 50%), the additional cost to Maersk Line will be around USD 250 Million per year.

On top of that Maersk Line will face increased costs for buying services from third-party feeder operators, who will also have increasing fuel costs.

Customers: To offset the additional cost incurred, Maersk Line will incorporate the higher average fuel costs into the existing standard bunker surcharge (SBF). We expect that additional cost to customers in affected trades will be between USD 50 and 150 per 40’ container to and from main ports, depending on transit time inside ECA areas and whether touching ECA areas at both origin and destination. Reefer containers will incur higher cost due to fuel used to generate power on board vessels; also cost will fluctuate depending on the volatility of low sulphur fuel prices.

Maersk Line will communicate more detailed SBF increases per trade when we get closer to implementation date and price difference between the different fuel types can be more precisely estimated.

NEED FOR STRONGER ENFORCEMENT

The North American ECA requirements are strongly enforced, but the current weak enforcement of the North European ECA requirements combined with the significant cost burden increase in 2015 might lead to increased non-compliance.This would not only weaken the positive effect on air quality, it would also be a major competitive disadvantage for the shipping companies that follow the rules.

Maersk Line is strongly encouraging relevant national authorities to put in place strict enforcement regimes that will create an industry level playing field and ensure that the positive environmental impact is not diluted.

Thanks