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Shipper Maersk Wants Hong Kong to Require Clean Fuel

Hong Kong has never met the air-quality targets it set in 1987. Maersk says Hong Kong’s reduced port charges for ships that use clean fuel cover only 40 percent of the added cost of going green

Photograph by Lam Yik Fei/Bloomberg

Hong Kong has never met the air-quality targets it set in 1987. Maersk says Hong Kong’s reduced port charges for ships that use clean fuel cover only 40 percent of the added cost of going green

Businesses usually vehemently oppose rules that raise their costs. But Maersk Line, the world’s biggest container-shipping company, says it’s willing to continue using low-sulfur fuel on container ships sailing from Hong Kong’s port to help curb the city’s big pollution problem. There’s only one catch: Maersk wants the government to force its rivals to be green, too. “Some carriers turn up here, they don’t switch to low-sulfur fuel, and they get a cost advantage,” says Tim Smith, Maersk’s North Asia chief executive officer. “We don’t think that’s right. What we want is the government to regulate.”

Maersk and 17 other operators have voluntarily used low-sulfur oil for the past two years to help curb Hong Kong’s pollution, the worst among global financial centers. Although the government provides incentives for shipping lines that switch to cleaner fuels for vessels calling on the world’s third-busiest container port, Smith says the incentives don’t offset all additional costs. He says Maersk ships will stop using cleaner fuel in Hong Kong at the end of this year unless the government mandates higher-quality oil for carriers berthing in the city.

Reverting to dirtier oil will be a blow to Hong Kong Chief Executive Leung Chun-ying’s plans to clean up a city where smog causes more than 3,000 deaths a year, according to Civic Exchange, a group that’s lobbied for years to improve the city’s air. “The longer the regulations wait, the longer we will continue to see these premature deaths,” says Veronica Booth, a senior project manager at the Hong Kong group, which has lobbied to clean up the city’s air for more than a decade. “Certain shipping lines are reluctant to spend money on these sorts of initiatives, particularly when there’s no end in sight to a voluntary scheme.”

Maersk, owned by Copenhagen-based A.P. Møller-Mærsk (MAERSKB:DC), burns fuel that contains 0.5 percent sulfur or less in ships that visit Hong Kong, Smith says. That’s one-seventh the level the government permits ships calling on its ports to use and half the level required of vessels calling at North Sea and Baltic ports. In September, Hong Kong cut port fees by 50 percent for three years for companies operating oceangoing vessels that switch to fuel containing no more than 0.5 percent sulfur. Smith says the use of cleaner fuel costs Maersk as much as an additional $2 million a year, with the discount in port charges covering only about 40 percent of the cost. Maersk made 850 calls to Hong Kong port annually, the company said in 2010, when it began to switch fuels.

Orient Overseas International, the biggest container line based in the city, will support the temporary measure and work with the government to create an emissions policy, spokesman Stanley Shen wrote in an e-mail. YF Chau, a spokesman for the city’s environmental protection department, also writing by e-mail, says the government and mainland authorities are exploring options that would make it mandatory for oceangoing ships to switch to cleaner fuel while berthed in the Pearl River Delta waters. (The area includes Hong Kong as well as Shenzhen, Guangzhou, and Macau.) Officials have set no date for a decision.

Sulfur dioxide emissions from ships would drop by 80 percent if all shipping lines switched to the cleanest fuel available, according to Civic Exchange. Hong Kong has never met the air-quality targets it set in 1987, a November government audit reported. In 2011 there were 175 days of very high pollution, more than twice the figure in 2007.

The bottom line: Maersk voluntarily uses fuel far below Hong Kong’s 3.5 percent sulfur dioxide ceiling. The company says that puts it at a disadvantage.

Wang is a reporter for Bloomberg News in Hong Kong.
Park is a reporter for Bloomberg News in Singapore.
Khan is a reporter for Bloomberg News in Hong Kong.

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