Coal traders will face higher freight costs starting later this year, as shippers gear up for tighter marine fuel standards in 2020, participants said at an industry conference.
The International Maritime Organization’s changes, which will cut sulfur limits in marine fuel to 0.5pc from the current 3.5pc starting on 1 January 2020, will push shippers’ costs higher. Some smaller players might try to skirt the rules, but they would risk losing eligibility to make large deals, Cees van de Mortel, chief commercial officer of terminal operator T Parker Host, said today at the Coaltrans USA conference in Miami.
“So one way or another, this is going to impact us,” van de Mortel said. “One way or another, freight is going to go up.”
Van de Mortel mentioned participants on the sidelines of the conference were projecting the fuel changes could increase freight rates for US thermal coal shipped to India by $3-$4/metric tonne. He and others did not discuss rates for other voyages.
The sulfur limits will have a global effect. But the potential increase in freight to Asia has the prospect of hampering US coal in competition with coal from countries closer to the continent. That would cut into the demand producers had hoped would offset declines in interest from traditional European customers.
“US participation is very much influenced by what happens with freight rates,” Xcoal president Jack Porco said at the conference yesterday.
Being able to ship coal to Asia last year at prices that were competitive with other markets helped boost US thermal coal exports to the continent to 20.8mn short tons (19.5mn t) in the first 10 months of last year, according to US Census Bureau data. That was a record. Full-year 2018 data will not be available for another few weeks.
US shipments to Europe also increased in the first 10 months of last year, to 13.1mn st. But that was just a four-year high, and demand is expected to decline in coming years.
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- On February 1, 2019