IMO2020 : The impact on short sea markets in Europe

The IMO 2020 low sulphur rules are generally seen as being a concern for shippers of deep sea cargo given the lack of transparency over additional bunker costs after 1 January 2020. However, there will also be tension between shippers and shipping lines in some European short sea markets in the run-up to the deadline.

As not all European waters are covered by a Sulphur Emission Control Area (SECA), shipping lines operating in the Irish Sea, the Mediterranean and along the Atlantic coast to the south of Cap Finisterre will incur additional bunker costs and will therefore seek to pass those costs on to their customers.

In a case study MDS Transmodal analysed the current and future bunker costs incurred in shipping a TEU of cargo between Rotterdam and Leixoes in Portugal using the methodology developed for its Bunker Adjustment Factor (BAF) Calculator. The BAF Calculator calculates the bunker consumption and costs per TEU before and after the IMO2020 deadline, taking into account the maritime distances both within and outside the SECAs.

 The results for the Rotterdam-Leixoes route show that, based on current bunker prices, the bunker cost per TEU would increase by 35%. This increase from €61 to €83/TEU in the headhaul direction will have to be either passed on to customers or absorbed by the line in a market that is subject to intense competition from road haulage. So the new sulphur rules could have the unintended consequence of leading to a switch of short sea traffic from sea to road on some intra-European trade corridors.