Hapag-Lloyd Marine Fuel Recovery mechanism

The maritime industry is facing great changes: Beginning on 1 January 2020, vessels will only be allowed to use fuel with a maximum sulphur content of 0.5 percent. The current standard is a sulphur cap of 3.5 percent. The so-called IMO2020 regulation is the largest in a series of International Maritime Organization (IMO) measures to reduce marine pollution. Using low sulphur fuel oil will be the key solution for the shipping industry and Hapag-Lloyd to remain compliant. Furthermore, it is the most environmentally friendly solution in the short term.
This will entail a radical transformation for the entire shipping industry. However, the good news in this is that the regulation will make the industry greener. For this reason, Hapag-Lloyd welcomes the new regulation and views it as an important step towards setting uniform standards that will benefit both, the environment and people. At the same time and on the assumption that the spread between high sulphur fuel oil (HSFO) and low sulphur fuel oil (LSFO 0.5%) will be 250 US-Dollars per tonne by 2020, Hapag-Lloyd estimates its additional costs being around 1 Billion US-Dollars in the first years. Furthermore, we aim for establishing a customer friendly solution for the calculation of fuel costs and a clear improvement with regards to the outdated approaches that are practiced in the industry.
With our new Marine Fuel Recovery (MFR) mechanism, we have developed a system that enables a calculation of costs for our customers that is causal, transparent and easy-to-understand – and that shows our customers just how high the additional costs of using low-sulphur fuel are. The MFR mechanism will be reviewed quarterly or monthly in case fuel price fluctuations are above USD 45 per tonne and takes into consideration various parameters, such as fuel costs, vessel size (basis: Market-class vessel), vessel utilization and route length.

The MFR will replace all previous fuel charges and be gradually implemented beginning on 1 January 2019. The amount of the MFR will be shown separate to the sea freight. The MFR is based on a formula that combines consumption with market prices for fuel oils.