Irish Continental Group plans to pass on the full cost of higher fuel prices it will incur as a result of new air pollution rules on the English Channel, North Sea and Baltic Sea.
Under an EU law agreed in 2012, ships must use fuels with a maximum sulphur content of 0.1 per cent after this year, down from the current limit of 1 per cent. The cleaner fuel is 50 per cent more expensive according to Irish Continental Group (ICG), Ireland’s biggest shipping company.
The impact of the new regulation will be “substantial”, an ICG spokesman said, adding the company will pass on “all of the extra cost in the form of surcharges and increased fares”.
ICG's container services to mainland Europe and ferry services to northern France will both be affected. It has not yet calculated the exact cost increase but "as a guide, some large European ferry operators are indicating freight rate rises of 15-20 per cent", the spokesman said.
Almost 100 per cent of Irish exports are transported by ship, and the busiest route is to Rotterdam. Most ships cannot switch fuels, so will have to operate with the more expensive fuel even in Irish waters not covered by the law. Ship owners also have the option of installing emissions-abatement technology but this is expensive and most have not done so.
Pharma and agri-food sectors
For
Ireland
, the biggest economic risk from higher shipping prices is to the competitiveness of the pharmaceutical sector, said
Howard Knott
of the Irish Exporters’ Association. This is Ireland’s main export industry, along with agri-food.
“Anything that pushes up the delivered-to-customer cost is bad for a [pharmaceutical] plant in Ireland because the companies are multinationals with plants elsewhere. For the foreign direct investment side of things, it has to be a worry,” Mr Knott said. He cautioned the exact cost of the new rules to exporters is not yet known.
“It’s like the millennium bug, you’re never sure what’s going to happen. Obviously [shipping] lines are competing and they’re not going to gratuitously set themselves up as more expensive than their competitors. It might be 20 per cent or it might be a lot less,” Mr Knott said, adding, for many, shipping is a small proportion of door-to-door freight costs.
The UK Chamber of Shipping argues “the sharp increase in demand for low sulphur fuel will see a massive spike in costs both for shipowners and potentially for ordinary diesel car users”. It is lobbying for a delay to the rules’ implementation.
But the European Commission "is not considering and will not grant any exemptions or derogations on the date of the entry into force", a spokesman said.