News / Rising bunker costs may drive ocean rates to pandemic heights

ID 149816317 @ Michele Ursi | Dreamstime.com

More surcharges on fuel could hike freight rates to levels only seen during the pandemic, warned Sea-Intelligence today, as carriers announced increased Q4 levies.  

Maersk today announced its updated Bunker Adjustment Factor (BAF) surcharge, using Platts’ fuel price index for 0.5% sulphur fuel oil (VLSFO) for the calculation. A BAF surcharge is based on oil prices and typically updated quarterly. 

The latest review period ran from 26 May to 25 August, and the average bunker price has increased to $509.82 per ton. The previous rate average, which came into effect on 1 July after the review period 26 February to 25 May, was $494.44/ton.   

Maersk’s new surcharges, coming into effect on 1 October, will be $306 per teu from Asia to North Europe, $447 from Asia to West Coast US and $745 to East Coast US.  

Hapag-Lloyd also announced its adjacent Marine Fuel Recovery (MFR) surcharge today, also effective from 1 October through 31 December, and calculated from the period 16 May to 15 August.  

Shippers contracted with the German carrier can expect to pay $325 per teu from East Asia to North Europe, $191 per teu from East Asia to US West Coast, and $356 to US East Coast. 

A recent Sea-Intelligence report warned of temporary periods of “sharp deviation” between freight rates and bunker prices, but concluded that although there was short-term volatility, the relation was stable over longer periods. 

Source: Sea-Intelligence Sunday Spotlight

CEO of Sea-Intelligence Alan Murphy warned that if this “relative stability” continued, the IMO marine fossil fuel tax – rumoured to add some $500/ton to the effective fuel price over the next decade – could see freight rates hit levels only seen during the pandemic disruption. 

“This also means that shippers looking at a long-term horizon, might begin to prepare for a future with substantially higher sustained rates than we have been used to in the past,” he added.  

Source: Sea-Intelligence Sunday Spotlight

Emily Stausboll, senior shipping analyst at Xeneta, added that in many cases, shippers “simply do not understand” the calculation behind the figure they are asked to pay. 

“Like anything in life, when you purchase product or service, you want to know where your money is going and whether you are paying under or over the odds. Freight is no different, so you can understand shippers’ concerns,” she said.  

And Ms Stausboll noted that even though each trade had a market average for fuel surcharges, there was “significant variance” in the amount shippers pay. 

“On the trade from South-east Asia to North Europe, the market average for fuel surcharges is $550 per 40ft… with a market low at $190, mid-low at $390, mid-high at $700 and high at $770.” 

But she advised that the most important figure for a shipper was the all-in rate they pay for carriage, regardless of how it is made up and what they pay for each surcharge.  

“Just because you pay the market high of $770 per 40ft for fuel surcharge does not necessarily mean your all-in rate in uncompetitive, if you have a low base rate. 

“Perhaps what is important for a shipper is… ensuring they remain agile and able to react to different scenarios during the contract period,” Ms Stausboll concluded.