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  • Writer's pictureJoseph O'Donnell

Ocean rates increase as IMO low-sulfur fuel mandate is now in effect.

Updated Jan 3, 2020:

Ship-line companies have begun implementing new Bunker Adjustment Factor (BAF) surcharges to cover the higher operating costs associated with switching from high-sulfur fuels to low-sulfur fuels.

The transition is in response to a mandate passed by the International Maritime Organization (IMO) which went into effect on January 1, 2020

According to the IMO, a 2016 study predicted that failure to reduce air pollution from cargo ships would contribute to over 570,000 premature deaths globally between 2020 to 2025. Thus, the IMO passed the mandate to lower fuel emissions produced by ocean vessels.

Low-sulfur fuels reduce the level of sulfur oxides in the air and subsequently result in a cleaner environment. To comply with the mandate, ships can purchase low-sulfur fuel blends or install scrubbers to extract the harmful particles from high-sulfur fuel emisions.

Click here to read more about the mandate on the IMO's website.

The increased operating costs from transitioning to these compliant methods began being past down by many ship-line companies last month.

Maersk, Hapag-Lloyd, and CMA-CGM began applying low-sulfur surcharges back on December 1st. Surcharge amounts differ based on the vessel routing and service, but some rates are scheduled to increase in excess of 15 percent.

It is uncertain how long carriers plan to apply these new BAF surcharges. Thus, shippers should prepare for paying higher freight costs on ocean shipments until further notice.

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