Asia-Europe carriers push surcharges on rate rally
Greg Knowler, Europe Editor | Jan 03, 2019 7:25AM EST
Shippers are getting 2019 off to a pricey start as rates rise, surcharges are levied, and carriers begin to implement the new low-sulfur fuel formulas.
Photo credit: Hapag-Lloyd
Carriers are hitting the container shipping market with a wave of surcharges on trades from Asia to North Europe and the Mediterranean to support a late December spot rate rally and maintain the higher prices into the peak period before Chinese New Year.
The higher prices are also coming at the same time as carriers start to phase in their revised bunker adjustment factors (BAFs) from this month in preparation for a global 0.5 percent sulfur cap on marine fuel that will be imposed from Jan. 1, 2020, by the International Maritime Organization.
Carriers are committed to passing on the $11-15 billion that the low-sulfur mandate is expected to add to their annual fuel bill through their various fuel recovery formulas, and according to online marketplace Freightos, shippers will feel the impact almost immediately.
Philip von Mecklenburg-Blumenthal, vice president of FBX at Freightos, said so far the market has seen recalculated BAFs, emergency bunker surcharges increases, and now new low-sulfur surcharges.
“These increases, beginning Jan. 1, will filter through next week [Week 2] with price rises in the 5-10 percent range, depending upon trade lane,” he said.
Hapag-Lloyd has informed customers of the low-sulfur charges it will levy on a host of trades from Feb. 1 via its new Marine Fuel Recovery (MFR) mechanism. For instance, the East Asia-South Europe MFR will be $231 per TEU in both directions, while the North Europe-Indian Subcontinent MFR charge will be $147 per TEU heading both east and west.
CMA CGM expects the low-sulfur fuel consumption from 2020 will raise per-TEU cost by $160, while Maersk Line estimates its BAF will add between $90 and $1,050 to the cost per FEU.
‘Scramble period’ for a few years
IHS Markit energy analysts predict a “scramble period” of up to a few years when a new equilibrium of supply and demand will be determined by refiners and shipowners. This could result in the price of low-sulfur bunker fuel hovering around $680 per ton in 2020, up more than 30 percent compared with the current price of high-sulfur bunkers.
The rise in their BAF is coming on top of a spot market surge on Asia-Europe where rates rose 14 percent just before the New Year, reaching $996 per TEU on Week 52 (Dec. 28), according to the Shanghai Shipping Exchange’s Shanghai Containerized Freight Index.
Market data from the JOC Shipping & Logistics Pricing Hub show that this was the highest level on Asia-North Europe seen in the past year, and 15 percent above the rate in Week 52 of 2017. It was a similar picture on Asia-Mediterranean trades where the rate shot up 15 percent compared with Week 51, but the year-over-year comparison was even more extreme, with the current rate 31 percent higher than at the same period in 2017.
Yet even as shippers get their 2019 off to a pricey start, the surcharges are coming in hot. Leading the way is Maersk Line, which has set its freight all kinds (FAK) level at $1,350 per TEU from Shanghai to Rotterdam, Felixstowe, and Gdansk for the first two weeks of January (Week 1 and 2).
Hapag-Lloyd has introduced a peak-season surcharge of $200 per TEU on both Asia-North Europe and the Mediterranean to go with new tariff rates on all sailings from Jan. 16. The carrier will be asking for $1,150 per TEU and $2,200 per FEU, to North Europe and West Mediterreanean, while rates to the East Mediterranean, Turkey, Black Sea, and Egypt will rise to $1,500 per TEU and $2,300 per FEU.
CMA CGM will increase its Asia-North Europe FAK rate to $1,250 per TEU for the second half of January and $2,400 per FEU for the date of loading from Jan. 15 until Jan. 31.