Emergency Bunker Surcharge pitches shippers, freight forwarders against carriers

The container market has been focused on the battle of the Emergency Bunker Surcharge pitching shippers and freight forwarders against carriers. The carriers are also looking at implementing other solutions to improve their arrival reliability as well as mitigating rising bunker costs.

One thing is certain. Opinion is divided. One question is if the proposed surcharges and slow steaming announcements are justified. The reasoning by the CEOs of the carriers seem sound. But the issue is whether it will actually resolve the fundamental problem of too much vessel capacity and not enough cargo demand. “Slow steaming is also a good way to absorb excess capacity,” one carrier said.

The container industry knows the carriers are taking delivery of their new mega-containerships in excess of 20,000 TEU. The problem is the only logical route these can trade on is the North Asia to UK and North Continent. Carriers are struggling to increase the spot box rates this month due to this fact and in most cases they did not achieve a mid-month rate rise.

The box rate validity was instead extended to June 30 alongside an average drop of $50 to $1,350/FEU for these routes this week. Some carriers are offering box rates as low as $1,100/FEU, but this is not representative.

From a bunker charge perspective, IFO380 is down $2/mt for the North Asia to North Continent route at $450/mt. On a monthly average basis though, June to date is $450 compared to April at $399.50/mt. Across the Atlantic the North Asia to West Coast North America route, PCR13 closed down $100 to $1,250/FEU.

Likewise for PCR5, North Asia to East Coast North America fell to $2,250/FEU from $2,300/FEU. The main reason for these declines is the failure to fill the ships. Certain carriers still have 100% capacity but had to drop their rates in line with the market or risk losing some cargoes to their competitors.

The IFO380 North Asia to West Coast North America route was assessed at $455.50/mt on June 14 from $463.50 on June 1. On a monthly basis it was up a similar amount to the North Continent route of $53/mt from April to June so far.

The East Coast North America from North Asia followed the West Coast North American characteristics and closed down $1 at $451/mt on June 14 from $452 on June 1. It also rose $54.50/mt to $450/mt for June to date from $395.50/mt for April’s monthly average.