New Sulphur Rules Force Changes at Stena Line

The new sulphur directive for shipping traffic within the North European SECA area, which comes into force on January 1, 2015, is good for the environment but has a significant economic impact on Stena Line's business.

 

The whole of the change program that begun in 2013, and which is to produce an earnings improvement of 1 billion SEK, is to a major part an effect of the new rules. The reduction from two vessels to one on the Trelleborg-Sassnitz route is a current example of these measures. Another example is that Stena Line is now being forced to increase freight prices as a direct result of increased fuel costs.

"From an economic perspective, this is one of the largest negative political decisions since tax-free was discontinued. We have a positive attitude to environmental improvement rules as long as they are the same for everyone and are implemented at a rate that we and our customers can handle - but this isn't the case with the new sulphur rules.  Ultimately, the increasing fuel costs affect the North European export and import industry negatively because a significant share of transports are done by sea," said Stena Line's CEO Carl-Johan Hagman.

For Stena Line, the changes mean increased fuel costs of 1 MSEK per day, or around 450 MSEK per year as a result of the more expensive low sulphur fuel.

"On the freight side, we thereby have to increase prices by around 15%. We want to be able to deliver the same quality and service and continue our efforts to offer environmentally effective transports. This means that we must charge our freight customers more to compensate for the increased costs," said Carl-Johan Hagman.

Stena Line has since 2005 worked to reduce its environmental impact within its Energy Saving Program, which has successfully reduced vessel energy consumption by 2.5 percent every year. In parallel with the change to low-sulphur oils, Stena Line is running a number of projects to look at alternative fuels and different techniques for emission purification.

"In early 2015 we will be starting a trial with methanol as a fuel on one of our ferries. At the same time we are investigating scrubber technologies and also looking at LNG as a fuel. Naturally, converting and rebuilding our ferries will both take time and cost a lot of money," says Carl-Johan Hagman.