A number of carriers have revealed how much the new low sulphur fuel charges are going to cost shippers.
A report from Drewry’s Container Insight Weekly shows that carriers are basing the new low sulphur surcharges, which will be collected in addition to ocean freight, on where trade is taking place and what a vessel is carrying.
The surcharges range from $30 per 40ft container for Asia to/from North West Europe to $280 per 40ft container for the Baltic region to/from Canada East Coast.
For large ships or high volume routes between Asia and both the US and North West Europe, the charges are lower and are only a small increase on current costs.
The transatlantic trade lane however is expected to receive low sulphur charges of a minimum of $120 per 40ft. This is an extra cost of 6% to 12% of typical spot rates, says Drewry.
The surcharges will also vary according to carrier. On the Asia-Europe trade for example, the surcharges of the three largest carriers are close. But on the transatlantic they vary widely. MSC is the most costly.
Drewry states that exactly how these additional costs are recovered is “an interesting problem”.
"Many high-volume shippers have specific “no surcharge” clauses within their contracts. Prior to the signing of the annual Transpacific 2015-16 contracts in May, carriers will have to negotiate with their customers to either adopt a modified low-sulphur component within the total bunker charge or apply a standalone charge. Much will depend on the existing contract terms.”
Shippers may or may not accept the surcharge in their next contracts. According to Drewry Supply Chain Advisors, the sea freight procurement consultancy arm of Drewry, shippers should try to include the new low-sulphur charges in all-inclusive rates fixed for a year. Using fuel-efficient mega-vessels would also mean carriers could mitigate some of the cost increases.
There is also a question mark hanging over whether the price of low-sulphur Marine Gas Oil when the January 2015 laws come into place will remain at current rates or increase due to industry demand.
"The cost differential between MGO and IFO will have a significant impact on the likely costs levied to importers and exporters. The TSA told Drewry that under the new regulations a $20 increase in the differential between MGO and IFO fuels would add $4 per feu in costs to carriers for Asia to US West Coast services and $7 per teu for Asia to US East Coast loops.
To cover any potential swing in the fuel price differential, the TSA will introduce a floating low-sulphur cost recovery formula that will be adjusted quarterly based on a 13-week average of weekly prices. The TSA’s formula will also take into account revised fleet characteristics such as vessel size, speed and effective capacity; MGO consumption rates; and sailing time within the ECA zone.”