Step change increase for bulk transport costs
Fuel typically accounts for 50% of voyage costs and sectors that rely on ocean-going freight for transport – such as the coal industry, should brace for fuel costs to rise in the lead up to 2020 and beyond.
We believe coal exporters and importers can expect a 20% to 40% step change increase in coal route voyage rates on a US$/tonne basis in 2020, depending on the compliant fuel type used and assuming shippers opt to switch fuels for compliance.
With the international shipping industry responsible for the carriage of a substantial proportion of world trade, any major increases in transport costs for ocean-going freight will have an impact on the global economy.
Knock-on effect for airlines
Shipping companies’ changing fuel requirements could be highly disruptive for the pricing and availability of other fuels and the impact could be felt far beyond global waters. For example, a spike in diesel prices due to a demand surge from the shipping industry could drive refineries to cut output of jet fuel, with the potential to increase airline fuel bills and put pressure on their profitability.
Prepare for disruption from 2019
The IMO’s limits on sulphur content for bulker fuels are set to disrupt the global shipping supply chain. With the hard deadline of 1 January 2020 approaching, we could well see an impact from as early as the middle of 2019. To prepare for these changes, seek expert advice to understand how the market’s response to the shift towards cleaner fuels will affect your business.