Nerves are fraying in the container market over how best to reflect rising fuel costs in customers’ freight rates in deals covering long periods of time.
Denmark’s Maersk Line, the world’s largest shipping company, announced an emergency bunker surcharge of $120/FEU for dry containers and $180/FEU for refrigerated cargo last month to compensate for higher fuel bills driven by sharp gains in crude prices over the past year.
Most of the world’s largest container lines have imposed similar surcharges.
But some of the industry’s customers have baulked at the surcharges, saying existing bunker adjustment factor arrangements should cover variations in fuel prices.
Opinion is divided on the right mechanism to recover costs in circumstances like the unexpectedly sharp rise in crude prices this year.
“The Emergency Bunker Surcharge (EBS) is a necessary action to ensure a continued sustainable service to our customers, and will only cover the extra costs,” Lars Oestergaard Nielsen, president of Maersk Line in Latin America and the Caribbean, told S&P Global Platts earlier this month.
“We are following the market trends closely and will adjust the tariffs as soon as the fuel price drops below the beginning level of the year,” he added.
But container industry consultant Lars Jensen argues the surcharges are not appropriate, and could make the market less transparent over time.
“The implementations announced now are not logical and seem more to be fueled by a need to do something urgently, than a need to implement a logical structure to the surcharge,” Jensen said. “If these surcharges stick, we will be left with the jungle of surcharges becoming more illogical and non-transparent.”
The problem for container lines and their customers alike is what represents a fair value for bunkers.
From a cost per 40 foot container (FEU) perspective, the new Platts Bunker Charge (PBC) 1&2, North Asia to North Continent, on a round voyage basis, for May 2018 average soared to around $438/FEU from $391/FEU in January 2018.
Looking more recently at the week to June 7, PBC 1&2 fell by more than $3/FEU to $443.01/FEU on June 7, from $446.75/FEU a week earlier.
Across the Atlantic, trans-Pacific round voyage Platts Bunker Charge 13&14 had the biggest drop this week, falling by $8/FEU to $463.76/FEU on June 7. North Asia to West Coast North America, PBC13, closed at $324.63/FEU on June 7.
The round voyage, North Asia to East Coast of North America, PBC5&6, had a similar fall to the North Continent this week, down $3/FEU at $752.08/FEU, June 7. The head haul route, PBC5, closed at $526.46/FEU, June 7.
These Platts Bunker Charges use our Low Sulfur Marine Gas Oil and HSFO 380 CST bunker benchmark pricing and include representative route specific ports along with other transparent variables.
This new pricing mechanism could provide the necessary transparency and reassurance to the carriers, shippers and freight forwarders to negotiate the bunker cost element. Please send us feedback or requests concerning the new Platts Bunker Charge assessments, using the contact details listed below.