Consolidation of Denmark-UK routes as a consequence of new sulphur emission rules

By: | at 11:16 AM | Liner Shipping  

Esbjerg-Harwich to close end September 2014. Freight volumes to be consolidated on Esbjerg-Immingham

DFDS currently operates two routes from Esbjerg, Denmark, to Harwich in southern England and Immingham in mid England respectively. The Esbjerg-Harwich route, transporting passengers and freight, will be closed at the end of September 2014. The majority of the route’s current freight volumes are expected to be transferred to the Esbjerg-Immingham freight route. Passenger services between Denmark and England will thus cease.

The consolidation of the two routes is part of DFDS’ strategy to adapt the route network to the introduction of new sulphur emission rules on 1 January 2015. The new rules will considerably increase the cost level of the Esbjerg-Harwich route. Moreover, freight volumes between Denmark and southern England have been declining in recent years. As a result, the financial performance of the Esbjerg-Harwich route will no longer be sustainable.

The total revenue of the Esbjerg-Harwich route was DKK 190m in 2013, of which more than half was generated by passengers. As the majority of the route’s freight volumes is expected to be transferred to Esbjerg-Immingham, the full-year revenue impact of the route consolidation is expected to be a decrease of around DKK 125m. The consolidation is not expected to have any material profit impact in 2014.

All of the ship’s crew will be offered new positions within DFDS. The ro-pax ship that is currently deployed on Esbjerg-Harwich, SIRENA SEAWAYS, will be utilized elsewhere in DFDS’ route network or chartered out.

DFDS’ transition strategy for new sulphur rules

From 1 January 2015, a new set of rules will limit sulphur emissions to 0.1% from the current limit of 1.0% in SECAs (Sulphur Emission Control Areas). These areas include the Baltic Sea, the North Sea and the Channel, which are DFDS’ primary market areas. The price of MGO (Marine Gas Oil) with a content of 0.1% sulphur is currently 40-50% higher than 1.0% bunker fuel, which is used today.

DFDS’ transition strategy to overcome the considerable financial challenge of the new rules has three elements:

• Customer dialogue to prepare freight customers for an MGO surcharge 1 January 2015

• Installation of scrubbers on up to 21 ships by 2017, a total investment of DKK 750m

• Consolidation of routes.

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