InfoMail July 2019

Sea freight: IMO 2020 / Sea freight: Blank Sailings / Australia: Fumigation obligation / South Africa: Harbor strike makes air freight scarce / Strait of Hormuz: Gulf Risk Surcharge

Dear Ladies and Gentlemen,

Sea freight: IMO 2020

The sea freight market is undergoing major global changes . As of 01.01.2020, stricter emission values will apply to ships. The International Maritime Organization (IMO), as an arm of the UN, will oversee existing worldwide shipping regulations. The IMO 2020 ordinance implements measures aimed at reducing impact on the environment.

Goal: Reduce exhaust gases significantly. In particular, the sulfur content in emissions from heavy fuel oil (the most frequently used kind) is critical. At the turn of the year, this is to be reduced to a maximum of 0.5% around the globe. Existing standard: up to 3.5% upper limit.

Ship owners are reacting to this situation - they are in the midst of major upheavals. How can that be accomplished? Essentially, through three variants. Option 1: The use of so-called scrubbers - i.e. retrofitting the fleet with large cleaning systems. This requires investments in the millions for each ship. Option 2: Liquefied natural gas (LNG) instead of heavy fuel oil. This requires larger tanks, conversion and also considerable additional costs. Option 3: Additives. The comparatively high sulfur content of hitherto used heavy oil offers substantial lubrication properties. These will be absent in the future; it is necessary to replace them with expensive additives. These will reduce emissions and ensure running capability of the engines. The tank system has to be modified; tanks have to be cleaned completely.

In any case, it is good for the environment. And it costs money. Shipowners are making such investments via installments or surcharges . Changes will be noticeable by the 4th quarter at the latest. Because capital investment is already underway at full speed.

Sea freight: Blank Sailings

Side effects of IMO 2020, especially in the shipping routes between Europe and Asia: shipowners are withdrawing ships from the trade, to retrofit them with new technology in shipyards.

However, there are deeper-lying reasons here. Weakening world trade will leave its mark. In order to increase utilization of the ships, capacity is reduced. The result: "Rolled" containers - those which remain in the port of departure (despite first booking), have to wait for the next departure. And so rates will rise.

The situation is quite different between Europe, North America and Mexico. Here, ships are full anyway. Technical conversion of the fleet exacerbates capacity shortages. Long bookings have long been the rule.

Australia: Fumigation obligation

Anyone who has ever sent sea freight to Australia is familiar with the Marbled Tree Bug (Brown Marmorated Stink Bug). As of 01.09.2019, the authorities "down under" will once again be demanding the gassing (fumigation) of all sea freight imports. The Department of Agriculture and Water Resources is in this way responding to the re-estimated threat to agriculture posed by this small animal. More info available on http://www.agriculture.gov.au/import/before/brown-marmorated-stink-bugs

South Africa: Harbor strike makes air freight scarce

One's pleasure is another's sorrow... Airlines with destinations in South Africa are currently enjoying dramatically increased demand. Capacity is extremely limited. This is because sea freight is suffering from strikes in the ports of the country. Operation times per ship are currently incalculable, with significant delays noted in agendas. The only solution for time-critical goods: aircraft.

Best option: regardless of the limited capacity of airlines with passenger aircraft, SENATOR INTERNATIONAL will fly non-stop to Johannesburg from Germany with its own B747-400 full-freighter. Redirects to Durban, Capetown and Port Elizabeth inclusive.

Strait of Hormuz: Gulf Risk Surcharge

Politically, the fronts on the Persian Gulf are hardening. The recent escalation has aggravated the situation for liner shipping. Costs increase - for example for insurance policies. With this, shipowners are currently collecting a Gulf Risk surcharge for ships en route through the Strait of Hormuz.

We will be happy to keep you informed.

Your SENATOR INTERNATIONAL Team