Environmental laws derived from Marpol, due to come into force next year could create a headache for freight forward planners, according to David Williams, managing director of Rhenus UK.
Legislation designed to reduce the sulphur dioxide (SO2) content of bunker fuel from 1.0 to 0.1% by January 2015, is estimated to add a staggering €3 billion to Northern European shipping's annual operating costs, which will inevitability be reflected in an increase in sea freight costs.
According to Williams, the sea freight sector is faced with one of four options to reduce its SO2 production by 2015:
- Switch to low sulphur fuel.
- Adopt liquid natural gas (LNG).
- Utilise scrubbers to clean emissions.
- Adopt methanol as an alternative fuel.
Williams said: "There are no exceptions and each of these options inevitably requires significant additional operating costs for shipping companies. It's difficult to ignore the likely impact this new law will have on the European freight industry. I anticipate an increase in sea freight prices which is unfortunately unavoidable due to legislation pushing up administration and operating costs. Furthermore, it could even lead to a rise in road transport emissions due to logistics managers choosing short sea passages and longer road routes to try and reduce shipping charges; directly undermining the logic behind the legislative change."
A recent report from AMEC confirmed the impact of the legislation on the UK freight industry, estimating job losses in the UK of approximately 2,000. Experts also anticipate an increase of between 1.3 and 3.6 million tonnes of freight coming back onto European roads as a result of the SO2 legislation.
Williams concludes: "Independent reports suggest that shipping costs could increase by as much as 10 or even 20% as a result of these new laws to reduce sulphur dioxide. We are advising our customers to be aware of the unavoidable increase in sea freight costs over the next few months, urging them to discuss their long-term export and import patterns now. This way, plans can be developed to reduce potential price increase exposure wherever possible. Rhenus has adopted an up-front policy to this issue, contacting customers proactively, to enable as much pre-planning to take place before these costs become unavoidable. Plus with one of the largest networks in Europe, Rhenus is able to create the shortest supply chain resulting in direct savings for the customer."