LSS – Low Sulphur Surcharge for Ecological Fuels
Low Sulphur Surcharge (LSS), sometimes also referred to as Low Sulphur Fuel Surcharge (LSF), is a surcharge applied by maritime carriers in international container shipping. Its primary purpose is to cover the additional costs arising from the use of more environmentally friendly, low-sulphur fuel or investments in technologies that reduce sulphur emissions. This surcharge is a direct response to global pressures to reduce the environmental burden of maritime transport and is directly related to international regulations, particularly the IMO 2020 standard.
LSS is today a standard part of the price offer of almost all carriers in ocean freight (maritime container transport). For freight forwarders, importers and exporters, it is essential to understand its significance, calculation and development, as it has a significant impact on overall costs and supply chain sustainability.
Alternative Names for LSS:
| Abbreviation/Name | Usage/Comment |
|---|---|
| Low Sulphur Surcharge | Standard designation in Europe |
| Low Sulfur Surcharge | American English |
| Low Sulphur Fuel Surcharge (LSF) | Emphasizes the fuel component directly |
| Green Fuel Surcharge (GFS) | Some carriers with emphasis on ecology |
| Emission Control Area Surcharge (ECA Surcharge) | Specifically for ECA/SECA zones |
Why Was LSS Introduced? Environmental and Regulatory Context
History and Motivation for Regulation
For decades, ships used heavy fuel oil (HFO) with high sulphur content (up to 3.5%) for propulsion. Burning HFO produced sulphur oxide emissions (SOx), which are the main cause of:
- Air pollution (PM2.5) – fine particles causing respiratory diseases, heart disease and lung cancer.
- Acid rain – SOx reacts with water in the atmosphere, forming sulphuric acid, which destroys forests, crops, ecosystems and infrastructure.
- Ocean acidification – part of the emissions dissolves in water, contributing to coral destruction and endangering marine life.
According to statistics, the 15 largest ships in the world produced more SOx than all personal cars on the planet combined.
Key IMO Regulatory Milestones
International Maritime Organization (IMO) is the main guarantor of environmental standards for maritime transport. It has adopted several key measures:
| Regulation/Date | Content |
|---|---|
| MARPOL Annex VI (2005) | First global limits on sulphur in ship fuels (initially 4.5%) |
| ECA/SECA zones (from 2015) | Stricter limit of 0.10% in the Baltic/North Sea, North America and Caribbean regions |
| IMO 2020 (from 1 January 2020) | Worldwide limit on sulphur in fuel max. 0.5% (from 3.5%) |
ECA (Emission Control Area) are specific coastal zones with higher population density and stricter regulation.
How Do Carriers Comply with IMO Regulations? Options and Costs
1. Use of Low Sulphur Fuel
- VLSFO (Very Low Sulphur Fuel Oil) – fuel with sulphur content ≤ 0.5%, price higher than HFO (often by 200–400 USD/t).
- MGO (Marine Gas Oil) – refined fuel with sulphur content ≤ 0.1%, required for ECA zones, the most expensive option.
Advantages: Immediately meets IMO limits, no need for technology investment.
Disadvantages: Significant and variable increase in fuel costs, dependent on the market.
2. Installation of Scrubbers (Exhaust Gas Cleaning Systems – EGCS)
- Scrubbers technically designated as EGCS allow burning cheaper HFO while exhaust gases are cleaned before being released into the atmosphere.
- Types of scrubbers:
- Open-loop – use seawater to neutralize SOx, wastewater is returned to the sea.
- Closed-loop – use fresh water and chemicals, waste must be stored and disposed of on land.
- Hybrid – combine both systems.
- Costs: Installing a scrubber on one ship costs 6–14 million USD, downtime of 4–8 weeks.
- Environmental aspects: Controversy over wastewater discharge, some ports (e.g. Singapore) prohibit open-loop operation.
3. Alternative Fuels and Technologies
LNG (Liquefied Natural Gas)
- Advantages: Almost zero sulphur content, lower CO2 and NOx emissions, lower solid particle production.
- Disadvantages: Limited bunkering infrastructure, high investment costs, “methane slip” problem (unburned methane leakage).
Bio-LNG and Bio-methanol
- Bio-LNG – produced from biomass, significantly lower GHG emissions (up to 80% less CO2 than HFO), compatible with existing LNG infrastructure.
- Bio-methanol – produced from waste biomass, liquid fuel with minimal SOx emissions, easy handling and storage.
- Pitfalls: Currently limited production capacity, higher price, need for new logistics.
Synthetic Fuels (e-methanol, e-ammonia, hydrogen)
- E-methanol and e-ammonia – produced from renewable sources and green hydrogen, almost zero carbon footprint.
- Hydrogen – the future for maritime transport, requires fundamental changes to propulsion systems and infrastructure development.
LSS Calculation: How is the Surcharge Amount Determined?
There is no single formula – each carrier has its own methodology, but the basic principles are similar:
| Factor | Explanation |
|---|---|
| Fuel price difference | Difference between HFO and VLSFO/MGO prices on key markets (Rotterdam, Singapore, Houston) |
| Trade Factor | Fuel consumption on a specific route, voyage length, ship type, share in ECA zones |
| Dynamic adjustment | LSS is regularly updated (monthly/quarterly) according to current fuel prices |
| Transparency | Some carriers list LSS separately, others integrate it into a comprehensive BAF |
Example calculation:
If the difference between HFO and VLSFO is 250 USD/t, average consumption on the route 100 t, ECA share 20%, the resulting LSS is recalculated per TEU according to ship capacity.
Difference Between LSS and BAF
| Factor | LSS (Low Sulphur Surcharge) | BAF (Bunker Adjustment Factor) |
|---|---|---|
| Reason for introduction | Covering costs of ecological fuels | Covering fluctuations in regular fuel prices (HFO) |
| Visibility | Often separately on invoice | May be part of a comprehensive charge |
| Validity | From January 2020 (IMO 2020) | Long-term, changes according to market |
Impact of LSS on International Trade and Logistics
1. Increased Transport Costs
- LSS is reflected in the prices for transporting each container, the surcharge amount can be tens to hundreds of USD per TEU.
- Greatest impacts on routes with high ECA zone share and long distances.
2. Transparency and Planning
- Customers demand clear explanation of LSS amount, its development and reasons for changes.
- Companies must take LSS into account when creating budgets and pricing products, as volatility is high.
3. Payment Responsibility
- Who pays LSS is determined by Incoterms (for example, with FOB the buyer pays, with CIF the seller).
- LSS applies to all types of containers (standard, reefer, special), not on the type of cargo.
4. Impact on Supply Chain Sustainability
- LSS is a tool to accelerate the transition to cleaner maritime transport and reduce carbon footprint.
- It directly motivates carriers and customers to choose more environmentally friendly solutions.
Scrubber Technology: Types, Principle and Trends
Operating Principle
- Scrubbers (EGCS) clean exhaust gases produced when fuel is burned on a ship.
- Process: Exhaust gases pass through a tower where they are washed with water and chemicals, SOx is neutralized to harmless sulphates.
- Output: Cleaned gas is released into the atmosphere, wastewater is processed according to scrubber type.
Types of Scrubbers
| Type | Principle | Advantages/Disadvantages |
|---|---|---|
| Open-loop | Seawater as reagent | Low operating costs, wastewater problem in some ports |
| Closed-loop | Fresh water and chemicals | Safe waste disposal, higher complexity and costs |
| Hybrid | Combination | Versatility, higher acquisition costs |
Investment and Operating Aspects
- Installation takes 4–8 weeks, ship is out of service.
- Return on investment depends on fuel price development and demand for ecological transport.
- By 2025, approximately 15% of the world fleet will be equipped with scrubbers.
Alternative and Synthetic Fuels – Trends, Advantages and Limits
Bio-LNG
- Production from biomass, lower CO2 emissions, compatibility with LNG engines and infrastructure.
- Limited production capacity, by 2030 will cover max. 3–5% of demand.
Bio-methanol
- Production from waste biomass, liquid fuel with great potential.
- Advantages: simple handling, minimal SOx and solid particle emissions, suitable for new propulsion systems.
Synthetic Fuels (e-methanol, e-ammonia, hydrogen)
- Production from CO2 and green hydrogen, possibility of almost zero carbon footprint.
- Require fundamental changes in ship engines and logistics infrastructure, currently in pilot project phase.
Life Cycle Overview (Well-to-Wake Analysis)
- Assessment of actual GHG emissions includes the entire process from fuel production to its burning on a ship.
- EU and IMO promote “Well-to-Wake” reporting, including emissions from fuel production and transport.
LSS in Practice – Frequently Asked Questions (FAQ)
What is LSS (Low Sulphur Surcharge)?
A surcharge covering the costs of ecological fuels or technologies that reduce sulphur emissions, introduced following IMO 2020.
Why do I have to pay LSS?
It is not a profit for shipping companies, but a direct reflection of increased costs to comply with environmental regulations.
How is LSS calculated?
Each carrier has its own formula – the basis is the difference in fuel prices, consumption on the route, ship type and share in ECA zones.
Who pays LSS – sender or recipient?
Responsibility is determined by Incoterms (FOB, CIF, etc.), most often paid by the party paying for ocean freight.
Does LSS apply to all containers?
Yes, LSS is linked to ship operations, not to the type or contents of the container.
Is LSS paid for air or road transport?
No, LSS is specific to maritime transport. Air and road transport have their own fuel surcharges.
LSS as a Tool for Ecological Transformation of Maritime Transport
Low Sulphur Surcharge is today an essential part of global maritime transport. It is not only an economic tool, but also proof that maritime transport is undergoing fundamental ecological transformation. It brings new challenges in costs, planning and investments, but at the same time it is a key step towards reducing negative impacts on air and oceans. Understanding LSS and its dynamics is today a necessity for anyone involved in logistics, freight forwarding and international trade.
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