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Container lines facing pressure over complex IMO 2020 surcharges: report

Container lines facing pressure over complex IMO 2020 surcharges: report
Container lines are facing growing pressure to standardise surcharges, which have become ever more complicated with the introduction of IMO 2020, a report by Alix Partners highlights.

Long a source of dissatisfaction for shippers the bunker adjustment factor (BAF) has become even more complex with the introduction of IMO 2020 with each line having its own variation on a basic formula covering a range of areas including fuel price, ship size and trade.

“The lack of transparency and standardisation of those variables is a constant irritant to shippers, freight forwarders, and non-vessel-operating common carriers (NVOCCs) and gives rise to the suspicion that some carriers are using the BAF as a revenue-raising tool as well as a cost-recovery and risk-sharing mechanism,” the report said.

“The uncertainty can lead to fraught negotiations and frayed relationships that take a toll on both sides and add to the headwinds the container shipping industry faces as it sails into what could be one of the most complex and consequential years in its history.”

Alix Partners said that the negative perception was likely to lead to new pressure for container lines to standardise pricing formulas, including BAF, with a pressure campaign potential being led by mega-shippers on the eastbound transpacific trade.

“Carriers could see their hard-fought financial gains of recent years totally evaporate if they fail to control costs, including how they manage fuel costs and customer expectations around fuel costs,” said Esben Christensen, global co-leader of the transportation and infrastructure practice at AlixPartners and a managing director at the firm.

The pressure of IMO 2020 is now being further compounded by the influence of the coronavirus.

“IMO 2020 was already going to make this a year of huge disruption for the entire maritime industry,” said Marc Iampieri, a managing director in the transportation and infrastructure practice at AlixPartners. “Throw in the coronavirus, the recent deterioration of some key financial measures and whatever other unforeseen disruptions lie ahead, and it’s clear that preparing for the worst may be the best way to avoid the worst.”

TAGS: Bunkering