2019 is the gateway to a gigantic shift in global shipping — the coming 2020 low-sulfur regulations. Ship operators have been working on strategies to cope with this certain reset of operating costs. Most carriers in our multipurpose/heavy-lift segment are poised to run their fleets on higher-cost, low-sulfur fuel, and will need to start doing so at the latest in the fourth-quarter of 2019. The impact to operating costs will mean thousands of dollars per day of steaming. These costs will require higher freight rates as carriers will not be able to absorb higher running costs.
Container carriers have already started implementing surcharges as many of them are investing in scrubbers that will allow them to burn the less-expensive, higher-sulfur fuel. In our segment, most owners do not have the required capital to install scrubbers and will prepare their vessels to burn the low-sulfur product and raise rates to cover the higher fuel costs.
Global trade and political uncertainty make forecasts for 2019 markets difficult; global trade and political uncertainty make volatility more likely than sustained growth. Our sector is still lacking a sustained upward trend in the movement of homogenous cargo, and, coupled with that, we face pressure from roll-on, roll-off and container carriers which themselves are short of cargoes and and have increased efforts to capture project cargoes, particularly on the major trade routes.
Higher fuel costs, increasing regulations that also boost costs, along with competitive pressures resulting from insufficient cargo flows all combine to deplete the resources of multipurpose and heavy-lift fleet owners, with the consequence that our sector is aging out without the capability of renewing itself — eventually, customer and cargo requirements will be impacted.