IMO 2020: Implementation of LSS and change of BAF reference fuel
From 1 January 2020, the new IMO (International Maritime Organization) 2020 Low Sulphur Regulation will be in effect – all sea-going vessels worldwide will have to comply and reduce their sulphur emissions by 85%.
To comply with the Regulation, sulphur in fuel oil must be reduced from 3.50% to 0.50%, in addition to the 0.10% sulphur limit already effective in the Emission Control Areas (ECA). This aims to reduce the amount of sulphur oxide emissions and should have major health and environmental benefits globally, including improving air quality and reducing risks of acidification of the oceans.
APL, as part of the CMA CGM Group, will be compliant with a mix of 3 solutions: using liquid natural gas-powered vessels, using advanced air quality systems onboard our vessels, and as the main solution, using compliant fuels with 0.50% or 0.10% sulphur.
The new IMO 2020 Low Sulphur Regulation impacts the global shipping industry and shipping costs are set to increase worldwide. As the cost of the Very Low Sulphur Fuel Oil (VLSFO) is expected to be significantly higher than the present High Sulphur Fuel Oil (HSFO), APL will implement a new price reference for its short-term and long-term contracts.
For short-term contracts of validity 3 months or shorter, please be informed that a new monthly charge – Low Sulphur Surcharge (LSS) – will be applied on top of APL’s ocean freight charges, effective 1 December 2019.
For long-term contracts of more than 3 months’ validity, please be advised that VLSFO will replace HSFO as the price reference for the quarterly Bunker Adjustment Factor (BAF), effective 1 January 2020. The BAF is applied on top of the ocean freight charges and will still be revised on a quarterly basis with a one-month notice. Kindly note that the BAF quantum for reefer cargo will be 20% higher than that of dry cargo for the same container size, with a minimum of USD25/TEU.
For more information, click to view APL’s IMO 2020 video.
Should you require any clarifications, please feel free to contact your local APL representative. Thank you for your business and continued support.