Three lines have already imposed surcharges effective from 1st June, with more announced. As shipping executives say that rises in bunkering bills need to be passed on to shippers, because further slow steaming is not an option.
The swelling bunkering price, up $10bn in the last 12 month, has overtaken the supply and demand issue to become the key concern for carriers.
CMA CGM yesterday became the third carrier to implement “emergency bunker recovery measures” after last week’s announcements by 2M Alliance members Maersk Line and Mediterranean Shipping Company of surcharges of $60 per TEU and $120 per FEU from June 1.
More lines are expected to announce surcharges. Either as a peak season surcharge (PSS) or an emergency bunker surcharge (EBS).
Despite being soft for much of 2018 all the indicators suggest that rates will start to trend upwards, driven by increased fuel costs and revenue-hungry carriers.
It is likely that carriers will spend the remainder of the year attempting to claw back profits, which will create spot market volatility, that will inevitably lead to rate spikes.
The shipping lines have been absorbing increased fuel costs over the last 12 months, mitigating some of the impact by slow-steaming.
It is now clear that the rise in bunkering bills, which they estimate to be $10bn, is going to be passed on to shippers because further slow steaming is not an option.
Despite sustained growth in volumes and revenue, which are likely to remain high throughout the year, the rising fuel costs and an unfavourable euro-US dollar exchange have led many lines to record losses in the first quarter, which is why we expect to see a drive to recover profits.