Scotline warns of increased freight rates for North European short sea routes13 October 2023
Shipping liner service and terminal operator Scotline has warned customers that international regulations and increased fuel and labour costs are leading to a rise in freight rates.
In a letter to customers, the Romford-based company’s director Peter Millatt warned that the North European short sea shipping market (dry cargo vessels up to about 5000 gross tons) was in a state of flux with changes and challenges coming from all sides.
“New international regulations have been introduced to force shipowners to reduce carbon emissions and progressively improve the environmental efficiency of the vessels,” he wrote. “This puts pressure on owners to scrap older vessels and build new more efficient vessels. This comes at a cost as the price of new ships has gone up by over 50% in the last five years, partly to comply with the new rules but mainly due to the increased costs of raw materials, labour, equipment and long lead times in the shipyards. The operational expenditure and capital expenditure have therefore both increased.”
Scotline also says it is being asked to look at alternative fuels, but biofuels are about 400% more expensive than standard marine diesel oil per calorific value and there was a lack of infrastructure and supply for all alternative fuels.
“There is speculation that if an alternative green energy is not used then shipowners would be levied with a carbon tax.”
Shipowners’ existing costs are also increasing, with large pay rises having to be paid to retain existing seafarers due to a labour shortage, while the supply of spare parts is suffering from very long lead times and high prices.
The UK and North European port industry is also in a similar position with labour shortages, escalating equipment costs and very long lead times.
“We have been trying to monitor the expected cost increases for the end of the year and most ports will not commit yet, but the feeling is that it will be about 8%,” added Mr Millatt.
Scotline informed its customers that it would have to make a small, incremental increase from January 1, 2024 to cover these increasing costs whilst maintaining service levels.