For the last few months, our ocean freight specialists at Approved and across our network of DeWitt sister companies have been keeping a close watch on the effects of the International Maritime Organization’s low-sulfur mandate.
Now that the January 1 deadline has come and gone, we wanted to share an update on the real-world effects of the IMO’s mandate. We talked to our experts to discover what they’re seeing on a day-to-day basis in the ocean freight markets.
But before we dive into their observations, we’ll give you a quick refresher on the issues at play.
What Is the IMO 2020 Low-Sulfur Mandate?
If you’re not familiar with the IMO or the new regulations that went into effect on January 1, 2020, here’s a quick run-down:
- The International Maritime Organization (IMO) is an agency of the United Nations, responsible for the safety and security of shipping and the prevention of marine and atmospheric pollution by ships.
- On January 1, an IMO regulation limiting sulphur in fuel oil came into effect, lowering the threshold from 3.50% to 0.50% mass by mass.
- To comply, steamship lines will need to make changes to the fuels they use and/or the equipment they operate.
- As a result, it’s likely that the demand for low-sulfur fuel will rise, resulting in higher fuel costs. These could get passed on to shippers as fuel surcharges.
If you want to take a deep dive into this topic, check out our previous article: “IMO 2020: How the Low-Sulfur Mandate Will Affect Worldwide Shipping—and Your Business.”
With the January deadline in the past, we wanted to take a fresh look at the issue by asking our Approved experts about the impact they’re seeing.
The Experts Talk: IMO Effects in Daily Commerce
We talked with several of our ocean freight experts who work with international destinations as well as Jones Act destinations. John Burrows, CEO of DeWitt Guam and President of DeWitt Move Worldwide, summed up our experts’ input best:
“We’ve definitely seen an increase in fuel surcharges, starting in early November when the steamship lines starting buying low-sulfur fuel. As the steamship lines learn what their actual costs will be, I think we’ll see another increase in the early part of the year.
That being said, I think it will be a small increase, not a substantial one. There’s been a lot of fear that surcharges would double or triple, but, as of right now, that doesn’t appear to be the case.”
We also asked John what shippers can expect to see for the rest of the year. His advice? Plan for adjustments and some volatility in the market:
“Over the course of the year, I think we’re going to see a lot more frequent adjustments as the steamship lines determine the availability of low-sulfur fuel. I would suggest accounting for potential fluctuations and increases within your budgeting process.
Hopefully, the costs are less than anticipated, and you’ll see some savings, but it would be better to account for these costs up front.”
Want to Talk More About Potential Impact on Your Business?
If you have any questions, don’t hesitate to reach out to one of our Approved ocean freight experts or your Approved Account Manager. Our team members can talk to you specifically about what they’re seeing within your shipping lanes and help you make any necessary adjustments to your budgeting process.
We’ll continue to keep tabs on the impact of the IMO’s low-sulfur mandate as the issue continues to develop. We’ll also provide updates from our ocean freight experts to help you make the decisions that keep your business ahead of the curve.