Shipping lines slammed for 'emergency' fuel surcharges - Supply Management
Maersk’s surcharge adds $60 onto the cost of shipping a 20ft container ©PA Images
Maersk’s surcharge adds $60 onto the cost of shipping a 20ft container ©PA Images

Shipping lines slammed for 'emergency' fuel surcharges

30 May 2018

The actions of shipping operators have been compared to cartel behaviour as three of the largest lines introduce emergency bunkering surcharges in the space of a week.

Chris Welsh, secretary general of the Global Shippers’ Forum, which represents the interests of shippers, accused the industry of using pricing methods similar the price agreements made during the Liner Conference System in order to push through short-notice price increases.

His comments come as MSC Mediterranean Shipping Company, Maersk Line and CMA CGM – which together hold more than 40% of the sector’s market share – announced in quick succession the introduction of emergency bunkering surcharges to cover increases in fuel costs.

Welsh said container ship operators needed to “fess up” and take responsibility and greater control of their costs instead of announcing “vaguely explained short-notice” surcharges on customers.

“It is incumbent on container carriers to provide their customers with full transparency regarding bunker surcharge costs, and to explain why an emergency surcharge is warranted on top of existing bunker surcharge mechanisms.

“The imposition of emergency surcharges has no place in a modern liner shipping market where costs and prices should be mutually agreed between customers and suppliers, preferably in mutually agreed service contracts,” he said.

He added that shippers would want to know what steps operators were taking to mitigate rising fuel costs.

MSC Mediterranean was the first to announce an emergency surcharge on Monday last week, citing the “continued surge in the bunker prices”. It said fuel prices were up 30% this year, and nearly 70% on prices last June.

“This last-resort measure is essential to ensure that we navigate these challenging economic conditions in a steady and sustainable way and continue to provide a high quality of service to all our customers,” it said.

Two days later Maersk announced it was also introducing an an emergency surcharge as a “necessary action to ensure a continued sustainable service to our customers”. CMA CGM announced its surcharge two days after that.

Maersk said bunker prices had now reached US$440 per ton in Europe, the highest since 2014. Their surcharge adds $60 per 20ft container and $120 per 40ft container.

Alex Hersham, CEO and co-founder of digital freight forwarder Zencargo, said this was the equivalent of a high, single digit percentage point compared to prices on the spot market. “It’s quite significant,” he said.

Speaking to SM, Hersham said it made sense for shipping lines to pass on costs, either through a surcharge or a general prices increase, considering the increase in fuel prices. “Fuel is their largest expense and variable cost, and with fuel prices going up so significantly they felt the need to pass that on to some extent to their customers,” he said.

He added that whether these surcharge held over the next four to six weeks would be a good indicator to shippers what they should expect to be paying for the rest of the year.

“Is the supply/demand balance in international sea freight such that this will stick and the shipping lines will hold those surcharges? Or is there still excess capacity in the system, especially with quite a few large vessels delivering in the back half of this year? And as a result will they lower those surcharges even if oil prices don’t go down?” he said.

“Intelligent shippers will really look at that with a keen eye on how it will impact the remainder of the year.”

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