LONDON / LOS ANGELES (Reuters) – The US furniture company RC Willey Home Furnishings is so concerned that new global clean air regulations are causing disrupted transport and have taken the supply of armchairs and sofas from China two months ahead.
FILE PHOTO: Shipping containers are displayed at Yusen Terminals (YTI) on Terminal Island in the Port of Los Angeles in Los Angeles, California, USA, on January 30, 2019. REUTERS / Mike Blake / File photo
The harder The regulations issued by the United Nations Maritime Organization, the International Maritime Organization (IMO), come into force on 1 January. The cost of ships will increase towards the end of this year, and this will have a negative impact on trucks and other carriers moving goods around the world.
For shipping companies, it has been the biggest shock in decades, increasing the pressure of economic slowdown and the danger of an escalating trade war between the United States and China.
While consumers are not expected to pay more for goods, higher transportation costs and disruptions to corporate supplies could further slow economic growth.
Ship owners must reduce sulfur emissions from 3.5% to 0.5%. They can do this by using low-sulfur fuel, installing emission control systems or opting for other, more expensive, clean fuels such as liquefied natural gas or driving slower.
Jeff Child, President of RC Willey Home Furnishings of Berkshire Hathaway, shifted the delivery of approximately 450 containers from September and October to July and August. He wants to avoid any disruption in the fourth peak quarter as the ships prepare for the changes, including the retrofitting of the equipment.
"We just do not want to get into a situation where this affects our inventory," he told Reuters.
Analysts believe that the container industry, which transports consumer goods such as sofas, designer clothing and bananas, will be hit hardest by additional costs of approximately $ 10 billion.
The world's two largest container shipping lines – Denmark's Maersk and MSC headquartered in Switzerland – face additional annual costs of more than $ 2 billion each. 25 logistics executives told Reuters that they would pass on all IMO-related costs, such as ship upgrades or more expensive gasoline, to their customers.
"The sulfur frontier will further increase pressure on ocean freight rates and we will have to pass on these costs to stay competitive," said Peder Winther, global seafreight manager at Swiss transport company Panalpina Group.
Economists assume that manufacturers will pay their share of the costs and are unlikely to raise the price of consumer goods, but the impact on business could weigh on the global economy.
A spokesman for Nestle, S.A., said the food group had talked to carriers about the "fuel-matching method" to reflect the impact of the new regulations.
"Higher fuel prices would lead to higher transportation costs," said Peter Nagle, economist at World Bank Development Prospects Group. "This would have the potential to lead to slower economic growth and trade."
The freight forwarders will suffer as well. The IMO rules do not apply to them, but they will be exposed to a new low sulfur fuel competition. This should increase the price of diesel fuel for trucks by up to 100 percent.
Small to mid-size truckers may find it difficult if they do not have the clout to negotiate fuel deals or cover costs.
"At the whim of the market, I can only tell customers what's going on," said Mike Baicher, president and chief executive of West End Express, New Jersey, 90 trucks in New York, New Jersey
"There is only so much the forwarder can absorb." "Negatively impacted by price pressure from the IMO 2020." It was said that market disruptions could occur.
"It is coming But we do not know how bad the storm will be, "said Glen Kedzie, energy and environmental consultant to the American Trucking Association.
" YOU PAY "
Shipping and forwarding companies offering a service , who oversees the delivery of goods from start to finish, expects greater cost pressures.
Bart de Vries, COO for Air & Sea at Hellmann Worldwide Logistics, headquartered in the US, expects higher cost of services as the R companies pass on the costs.
Some companies may revise their business plans.
"Undoubtedly, many exporters and importers will be forced to review their sourcing strategies and suppliers," said Cas Pouderoyen, senior vice president of ocean freight at global logistics firm Agility.
Richard Fattal, co-founder of digital freight forwarder and logistics service provider Zencargo, said the total cost of ownership could increase by 10 to 20% next year. Allen Clifford, a US-based executive vice president of MSC, recently said at a forum in California that his company is facing huge costs.
"Who will pay for it? You will pay for it, because I'm tired of paying for it," he told industry executives and port and customs officials.
Additional coverage by Richa Naidu and Karl Plume in Editing by Anna Willard