The sulfur content in the fuel used for maritime transport, which currently is limited at 3.5%, will be limited to 0.5% starting January 1, 2020. This new regulation of the International Maritime Organization (IMO) will lead to a rise in fuel prices that will affect the maritime transit of agricultural goods.
According to the IMO, the objective of this requirement is to improve air quality and protect the environment." The combustion of the ship's engine releases sulfur into the atmosphere along with the rest of the ship's emissions. Sulfur is harmful to human health, causing respiratory symptoms and lung diseases, and it can produce acid rain, which has negative effects on crops, forests, and aquatic species.
The president of Chiquita Brands International, Carlos Lopez, said the new regulation is already affecting the company's costs. Currently, there are alternatives to fuel with low sulfur content, such as natural gas or the installation of scrubbers to clean emissions. However, Lopez stated, the effectiveness of these measures will only be noticeable in the medium to long term.
Costs
Chiquita has twelve ships of its own to transport bananas. Seven of them serve North America and five serve northern European markets. The first of Chiquita's ships was supplied with low sulfur fuel on November 7. Lopez said the price ranged between $ 500 and $ 600 per ton, while the previous fuel cost them $ 350 dollars per ton. The most important thing for the banana company is to ensure the supply of fuel so that their ships and shipments are not delayed.
The cost pressure
During the past 30 years, the price of bananas has always been lower compared to other products. However, that era could have come to an end. "There are cost pressures from all directions now (...) Inflation in labor, inflation in materials, and now new regulations on fuel will increase costs,” Lopez stated.
As a result, the costs will be transferred to customers through a fuel surcharge and the year 2020 will be challenging. "It will be a somewhat rough trip over the next six to twelve months, but Chiquita bananas will continue to grow. We'll continue to ship our product and it will be available for consumers," the company's president concluded.
