Erik Hoffmann of global energy and commodity price reporting agency Argus Media on Friday (20 March) published an analysis on German shipping company Hapag Lloyd’s fuel consumption in relation to IMO 2020 as well as its strategies in preparation for the aftermath of COVID-19:
German containership company Hapag-Lloyd burned 28% more low-sulphur fuel in 2019 than in the year, as most of its fleet switched to low-sulphur fuels in the last weeks of the year.
Hapag-Lloyd mostly bought high-sulphur fuel oil (HSFO) last year, but the share of low-sulphur fuel consumed rose from 13% in 2018 to 16% last year. It consumed 3.66mn t of HSFO in 2019, along with a combined 720,000t of 0.5% sulphur fuel oil and 0.1% marine gasoil (MGO).
The company described the transition to comply with the International Maritime Organisation (IMO) 0.5% sulphur cap as “smooth”, but noted bunker price volatility in the months before and after the sulphur cap entered into effect on 1 January.
The firm paid an average of $416/t for its fuel last year, a drop of $5/t from 2018. It consumed a total of 4.38mn t of bunker fuel, down by 1% from 4.40mn t in 2018.
Its fleet became 3% more fuel efficient last year, burning 0.36t/twenty foot equivalent unit (TEU), and has become 41% more fuel efficient since 2009.
The company took up a $100mn loan in September 2019 to finance exhaust scrubber installations on 10 of its owned and on nine of its chartered vessels. Scrubbers, which allow vessels to continue burning HSFO after 1 January 2020, typically cost between $2mn-5mn each.
The company turned a profit of €373mn last year, up from €46mn in 2018.
Hapag-Lloyd will pass on the higher costs for low-sulphur fuel this year to shippers, with bunker adjustment factors running for three-month periods from December 2019. It has hedged its remaining bunker price risk.
The company had forecast an average low-sulphur premium of $250/t and for the sulphur cap to add $1bn to its bunker bill in 2020. But premiums are now below $100/t, after a period of well over $300/t in early January, thanks to a combination of improved supply logistics for low-sulphur fuel at ports, coronavirus pandemic-related lockdowns and crude price moves arising from the breakdown of the Opec+ deal.
Hapag-Lloyd expects the pandemic to have a negative effect on its shipping volume and cash flow, particularly from May because reduced consumer demand will show up in container volumes with a lag.
The firm has not placed many orders for newbuilds, and the proportion of its fleet that is idle has increased significantly. Hapag-Lloyd added 12 vessels to its fleet in 2019 and had a total of 239 by the end of 2019.
Photo credit and source: Argus Media
Published: 23 March, 2020
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