Close collaboration with customers and partners will be important to ensure the best, and most cost-effective, approach.
On August 1, 2012, a new Emission Control Area (ECA) comes into effect off the North American coast. It means that all vessels operating within 200 nautical miles of the US and Canadian coastline will have to use fuel with a lower sulphur content of just one percent.
Similar environmental regulations are already in operation in the Baltic and North Seas and the English Channel; in addition all EU and Californian ports require vessels to use cleaner low-sulphur fuel in their ports. As low-sulphur fuel is roughly 8 to 12 percent more expensive than traditional heavy fuel oil used on the high seas, which has a sulphur content of up to 3 percent, this will have a significant impact on vessels operating in these waters. Even tighter regulations will come into force from January 1, 2015, when vessels will need to switch to an ultra low sulphur fuel called Marine Gas Oil (MGO) which will reduce sulphur content in fuel to just 0.1 percent.
In line with these new environmental regulations, Wallenius Wilhelmsen Logistics (WWL) will introduce a sulphur regulation charge from August 1, 2012, on cargo moving in and out of these emission zones. This surcharge will be based on the vessel’s size and volume of cargo moving in and out of the zone, the vessel’s speed, time spent in the regulated zone, the number of voyages and the difference between the cost of the lower sulphur fuel and normal fuel used on the high seas.
WWL has been preparing for this challenge for some time, working hard to cut fuel consumption and emissions through investments in vessel design and technology to reduce the knock-on cost effects of these new rules as much as possible.
“First of all we design our vesselss specifically for customer needs and environmental requirements, rather than ordering standard vessels,” says Christopher Connor, WWL’s Deputy CEO and Chief Commercial Officer.
“The design objectives for the new Mark V vessels are an example: it has an optimum hull shape to give good form stability and low resistance, good transport economy, efficient and safe cargo handling, and minimum environmental impact.
”The Mark V RoRo vessels improve transport efficiency by 15 to 20 percent compared to the previous generation of Mark IV vessels. This helps WWL to absorb some of the fuel cost increases but not all.
“We have worked closely with our bunker suppliers to ensure that we have access to bunker of the right qualities as demand increases in the future,” says Connor. “For the eighth year in a row, we have kept the average global sulphur content of bunker fuel below 1.5 percent, so we have some experience to build on. ”Close collaboration with customers and partners will be important to ensure the best, and most cost-effective, approach to handle the rising operational costs being driven by the reality of new environmental regulations.
“Working closer together with our customers in designing and optimising the outbound supply chain for their vehicles from factory to dealer, rather than just managing a part of the journey, makes it possible for us to find the most efficient routes and ways of working,”concludes Connor.
“It could also mean collaborating with several customers around a common resource or route as away to drive efficiencies.”
Emission Control Areas (ECAs) are areas which have been designated by the International Maritime Organisation (IMO) as waters where lower sulphur fuels must be used. So far, the Baltic Sea, North Sea and English Channel have designated ECAs and two more – North America (August 2012) and the Puerto Rico area in the Caribbean (January 2014) – will be added shortly. In addition to the ECA zones, all EU and Turkish ports as well as those in California, US, require all vessels to use cleaner ultra low-sulphur fuel when in their ports. These tighter regulations mean higher fuel costs for vessels operating in these areas, a cost which shipping companies have no choice but to share with their customers.