A new surcharge to sea transportation was added because of the new regulation mandated since 2020.
The IMO (International Maritime Organization) has revised the Malpol Convention (Marine Pollution Control Treaty) to require that low-sulfur fuel called LSC heavy oil be used for ship fuel.
Simply put, it has been decided by the international organization that it’s not good to use unfriendly fuel that has been used before.
This time, I would like to explain the LSS (Low Sulfur Surcharge) added by this.
Exhaust gas sulfur oxides contribute to PM2.5 air pollution
As you know, air pollution by PM2.5 has become an international issue. PM2.5 is generated from sulfur oxides (SOx) contained in exhaust gas when traced back.
So, in order to reduce PM2.5, which is harmful to your health, IMO (International Maritime Organization) is trying to reduce sulfur oxides (SOx) in exhaust gas that causes PM2.5.
Senior Cat By the way, it’s called SOx regulation.
What is low sulfur?
Since it is sulfur, Low Sulfur refers to low level of sulfur.
It means we should use fuels with a low sulfur content, the standard for that sulfur content is as follows.
・Conventional heavy oil C: HS (High Sulfur): 3.5% or less
・Low sulfur heavy oil C: LS (Low Sulfur): 0.5% or less
Heavy oil with a sulfur content of 0.5% or less is Low Sulfur heavy oil, and it is a rule to use this heavy oil to suppress the generation of PM2.5.
Use conventional heavy oil C with Scrubber
Senior Seagull By the way, if you install an exhaust gas scrubber on your ship, you can use conventional heavy oil C.
Using a scrubber, even with clean conventional heavy oil C, you can clean exhaust gas to the level of using low-sulfur fuel. Therefore, you don’t need to use low-sulfur fuel.
Why do surcharges occur?
Low-sulfur fuel is about 30% to 50% more expensive than conventional heavy oil C that could be used until now. Shipping companies must also cover this as fuel costs.
Also, for ships that have introduced scrubbers, shipping companies must also make up for the costs.
Senior Cat It seems that scrubber equipment costs several million dollar…
Senior Seagull LSS is the cost of making it environmentally friendly.
Lion Professor By the way, in the specific sea area (ECA)- ① the North America and US Caribbean Sea and ② the North Sea and Baltic Sea, there are some sea areas where it has to use fuel with a sulfur concentration of 0.1% or less.
Low Sulfur Surcharge of each shipping company
By the way, it is LSS to make this environment-friendly, but the amount varies depending on shipping company. I don’t know why, but there must be a strategy for each shipping company.
Around November 2019, when it became a fuss that this LSS would begin to be introduced, my company also had various inquiries from customers with insufficient information from each shipping company.
カモメ先輩 At the time of introduction, each company seemed to look like other companies.
Shipping companies that have their own name and calculation method to LSS
I haven’t looked at all shipping companies, but the following two companies use a different term instead of LSS to describe the new fuel surcharge.
ONE’s LSS: OBS
・ONE：ONE Bunker Surcharge（OBS）
OBS is set less expensive than other companies’ LSS, and according to ONE, it has its own calculation method.
It may be better to issue the marine fare in All in.
EverGreen’s LSS: ISOCC
・EverGreen: IMO Sox Compliance Charge (ISOCC)
Evergreen’s LSS is expressed like this. I remember when I first saw the Evergreen quotation, I found the item “ISOCC” and searched the term on google.
LSS has tariffs and selling prices
LSS tariffs from Thailand to major ports in Japan are, with Dry containers, as follows;
・USD 70/20’
・USD140/40’
I think that was like this. ※ I’m sorry not to remember well… I’m sorry if it was wrong.
But this is a tariff and each shipping company has actually offered its own price to us.
LSS as a forwarder
Some shipping companies submit the same LSS to each forwarder, while other shipping companies set LSS cheaply.
LSS is generally fixed for three months in tariffs, but we are offered by certain shipping companies at much lower prices than tariffs and negotiate monthly.
Senior Cat It changes every month because we are negotiating to keep LSS down.
There is no price increase for tariff LSS, but please understand that if negotiated for the customer, LSS may rise.
Conclusion
International logistics involves various organizations and regulations change regularly. In recent years, there has been a VGM introduced by the IMO Solas Treaty (Marine Life Safety Treaty).
Regulations are changing to make trade better, and we must operate our business accordingly.
This LSS was required for the global environment, and the cost increase is painful, but we would appreciate your understanding.
