In a recent article Drewry stated that the new regulations of IMO 2020 are expected to increase the number of containership demolitions. The relentless upwards charge of Brent crude in 2019, which recently passed $75, is an obvious concern for containership operators that are at the same time in the dark over the starting price of the more expensive low-sulphur fuel oil mandated by the regulations for the start of next year.
News that the US will cease granting waivers for the import of sanctioned Iranian oil will also contribute to carriers’ rising operating expense in the short-term, but it is the lack of visibility into the extra fuel costs associated with IMO 2020 that is making it harder to plan much further ahead.
One such area of uncertainty is with demolitions. Drewry has long expected that IMO 2020 will trigger much greater scrapping of containerships as many older and less fuel-efficient ships will be rendered uneconomic. The rapidly increasing move towards fitting exhaust scrubbers could force charter rates down for some ships that are not fitted with the system, potentially swelling the number of demolition candidates. There are changing times ahead.
Meanwhile the government has managed a £50 million loss for cancelling contracts to charter extra ferries in the event of a no-deal Brexit.The decision to award the contracts has been a major political embarrassment after it emerged the government handed out a £14 million contract for extra ferries to a company that owned no ferries and published terms and conditions on its website that appeared to be for a takeaway food business!
Then, the government was forced to pay a further £33 million to settle a lawsuit brought by Eurotunnel, which complained that it was unfairly prevented from bidding on the ferry contracts, which were negotiated in secret. In a further twist, a rival ferry operator, P&O, has said that it was preparing its own legal action amid claims that the payout to its rival Eurotunnel was unlawful.
What an appalling mess and further evidence that politicians are not the right people to be running the country!