2020 Sulphur Cap: MSC explains new charges

MSC Mediterranean Shipping Company S.A. is introducing new bunker charges as of 1 January 2019 to achieve the common goal of improving environmental performance in the container shipping supply chain, as required by the 2020 Sulphur cap. “We believe that it is essential to segregate transparently the burden of fuel costs, in order for this cost to be passed on visibly throughout the supply chain. Passing on that cost is also vital to ensure the sustainable future of the container shipping industry”, the company announces.

With regard to the UN International Maritime Organization’s 2020 Sulphur fuel content regime, MSC has estimated that the cost of the various changes to make in the fleet and for its fuel supply is in excess of USD 2  billion per year. Therefore the company has already had to start incurring these costs to be ready for 2020.

After considerable analysis of operating costs and related market factors, MSC has established a new price mechanism – the BRC (Bunker Recovery Charge) – which will be transparent to respective trades. It will reflect the true additional cost that MSC will incur as a result of the regulatory changes they support in order to protect the environment.

The BRC = Fuel price per ton (currently based on the monthly average of the HSFO 380 CST index for each specific trade/service; from Q4 2019, low-Sulphur fuel oil 0.5% may apply, in order to be ready for 2020) x trade factor (coefficient = fuel consumption per round trip ÷TEUs carried round trip. For reefer cargo, the BRC will be calculated as BRC x 1.5, due to the additional cost of electricity generation used to power reefer containers.

The BRC replaces the current Bunker Contribution (BUC), Fuel Adjustment Factor (FAD) and Emergency Fuel Surcharge (EFS), and largely absorbs other pre-existing fuel-related charges. Charges specifically related to coastal Emission Control Areas (ECAs) will remain in place.

The UN International Maritime Organization requires that from 1 January 2020, Sulphur content in the fuel used for international shipping must be limited globally to 0.5%, compared with the current standard of 3.5%, in order to minimize emissions of Sulphur oxides from ships.



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