BIMCO’s Chief Shipping Analyst Peter Sand reports that the higher fuel costs associated with low sulphur fuels have taken their toll on dry bulk sector earnings.
In an analysis of the dry bulk market posted on the BIMCO website yesterday (26 February), Sand noted that fuel costs have significantly risen since the 2020 sulphur cap was implemented. Sand commented: ‘The steep drop in earnings illustrates that passing on the extra fuel cost has been near-impossible to implement on voyage charters.’
In comparison, Sand highlights that earnings on scrubber-fitted vessels remain higher because of the lower cost of high sulphur fuel.
The additional costs associated with the IMO 2020 sulphur cap were also mentioned in a further market analysis on container shipping, also posted on BIMCO's website yesterday. Sand noted that whilst in January freight rates rose, ‘The hike this year was not enough to cover the additional costs of the IMO 2020 sulphur cap, with the market offering little support to carriers attempting to pass these on fully.’
Sand noted: ‘Comparing the January 2020 average with the January averages of the past six years of China and Europe paints a similar picture. The freight rates are above the six-year average – but not remarkably so – and not enough to cover the additional fuel costs from IMO 2020, this adds further pressure to carriers’ bottom lines.
Sand continued: The Bunker Adjustment Factors (BAFs) have been widely criticised for not being transparent or for being too complex to understand, leading to carriers having trouble implementing them. Those that have succeeded may have done so by lowering the underlying freight cost, such that the total price shippers’ pay has not changed much.’