The Loadstar Leader: Fuel prices set to come down – just as BAFs are set to soar
If – and in this context, “if” is the biggest word in the English language ...
By Alison Koo
Taiwanese mainline operator Yang Ming has said that surging bunker prices will be in its favour when negotiating this year’s transpacific contracts.
In a press conference held two weeks after Yang Ming announced its 2025 results, showing lower net profit after a correction in freight rates.
Yang Ming president Kevin Lee disclosed that shipping lines will implement fuel surcharges on 1 April to reflect increased costs arising from soaring crude oil prices amid the US-Israel-Iran conflict.
However, the fuel surcharge will vary depending on the route – the longer the route, the higher the surcharge.
According to the Baltic Exchange, as of yesterday, prices of very-low sulphur fuel oil, the most commonly used marine fuel, averaged $841 per tonne in Singapore, $896 per tonne in Zhoushan, $723 per tonne in Rotterdam and $798 per tonne in Houston.
While prices have eased from the $1,000 per tonne mark in the last fortnight, they are still nearly double from before the Middle East hostilities broke out.
Mr Lee said: “Fuel accounts for about 17% of our costs, but over 60% of our fleet is scrubber-fitted, enabling these vessels to burn cheaper high-sulphur fuel oil to reduce costs.”
Currently, it is the annual contract negotiating period for transpacific routes, and with the US-Israel-Iran war pushing up oil prices Yang Ming expects that this year’s contract rates will exceed last year’s levels.
Contracts are expected to be signed gradually, starting in mid-April.
Addressing concerns about the impact of the Strait of Hormuz blockade on container shipping, Mr Lee responded that more than 150 container ships are currently stuck in the Persian Gulf, holding up 500,000 teu of capacity, accounting for approximately 1.5% of global shipping capacity, not including ships waiting outside the strait.
Yang Ming’s Persian Gulf service is part of the Premier Alliance. With one vessel stranded in the region, the Premier Alliance will reroute vessels originally intended for the Middle East to services to the US, North Europe and the Mediterranean.
“Less than 1% of the global container shipping fleet is idle. While there was a significant oversupply of ships last year, the supply-demand gap is expected to narrow this year, as shipping and container availability tightens,” Mr Lee added.
Yang Ming’s management also believes that port congestion will also work in shipping companies’ favour, with vessel queues lengthening in South Asia and Europe.
Mr Lee said that Europe has long experienced port congestion due to weather and structural issues, and if the conflict escalates, it could potentially spread to Asian ports.
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