Cargo ships unload goods in the Tunisian port city of Rades. (Photo: Fethi Belaid/AFP/Getty Images)
The big-screen televisions and cotton shirts that Americans buy come across the ocean on container ships which make today’s global economy possible. We spoke this week with Christopher Koch, president of the World Shipping Council which represents Maersk, Hanjin, APL, and other major shipping companies.
Is there legislation likely to emerge from Congress next year that would be of concern to the shipping industry?
There’s nothing that the shipping industry is particularly looking to Congress to do next year. There’s always the ongoing question of the ports working with the Army Corps of Engineers on getting dredging money for particular deepening projects or maintenance projects.
Are U.S. ports at a disadvantage because not enough is spent on dredging, maintaining, etc?
In terms of the deep-water container ports, the major container ports are being maintained at the [required] depths – so Baltimore is at 50 feet, Norfolk is at 50 feet, New York, I believe, is finished going to 50 feet, Charleston is in the process of getting there, Savannah is in the process of getting to 48, Miami is at 50.
And on the West Coast you don’t have any draft problems at Seattle-Tacoma, Oakland or L.A.-Long Beach.
I think the ports, from a dredging perspective, are doing OK. They would like to have more money to get it done faster.
How has the decline in the price of oil affected the industry?
There’s always a lag. The shipping lines always try to recover their fuel costs from customers and their success is always questionable, so it’s always a cost pressure on them.
Clearly the dropping of fuel prices has been helpful to take some of the cost pressure off.
But at the same time, many of those fuel costs are recovered through something called a “BAF” or a bunker adjustment factor. For the contracts that use those kind of mechanisms, the price automatically drops to the customer when the fuel price drops.
I’ve seen reports that bunker [fuel] prices have been coming down since this price reduction started a couple of months ago.
At the same time, what the industry is facing, as of Jan. 1, is a very steep increase in the cost of fuel because of the implementation of the requirements in the emission control areas.
Emission control areas are areas set up by governments under the international marine pollution convention that provide particularly strict sulfur standards in marine fuel.
The U.S. and Canada have an emission control area jointly within 200 miles of the U.S. shores; there’s also one in the Baltic, one in the North Sea, and one in the Caribbean.
In those areas you have to use low-sulfur fuel and that’s considerably more expensive.