Bimco analyst Peter Sand has warned that a failure by container lines to pass increased fuel costs from the IMO 2020 sulphur cap could result in bankruptcies. In his latest report for container shipping, Sand warned of a tough year for the mainline container trades, as there are number of pitfalls ahead including the impact of the US – China trade war and signs that the Europe containerised market is “saturated”.

“Nevertheless, the dominant theme of 2019 will be the sharing of the higher costs that are expected in various forms towards the end of the year, as the starting line for the IMO 2020 sulphur cap approaches,” the Bimco report said.

Whether container lines opt to use low sulphur fuel oil or fit scrubbers to continue using high sulphur fuel oil after 1 January 2020, they will face significantly higher costs per unit. The third largest container line CMA CGM estimated the additional cost to be $160 per teu on average as result of the sulphur cap.

A failure by lines to recoup these costs from shippers could be disastrous, Sand warned. “Unless these costs can be passed on to the end consumer through the whole supply chain, profit margins in the container shipping industry will be reduced everywhere; a failure to recover the extra fuel costs in full may even result in outright bankruptcies in the container shipping industry.”

Most major container lines have announced surcharge mechanisms, such as new bunker adjustment factors (BAF), to recoup the costs of complying with the sulphur cap but these have been met with an angry reaction from shippers and forwarders. According to seatrade-maritime.com¸ the surcharges have been described as “blatant profiteering”.