Carriers seek ways to reduce impact of rising bunker fuel costs

ASIDE from implementing an emergency bunker surcharge, container
shipping lines are considering other measures to mitigate the
increasing cost of bunker fuel.

One question the container shipping market must consider is whether
the proposed surcharges and slow steaming announcements are justified.
According to London's S&P Global Platts, the issue is whether slow
steaming will 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," Platts
cites one unnamed carrier as saying.

The container industry knows the carriers are taking delivery of new
ships in excess of 20,000 TEU. The problem is the only logical route
ships of this size can be deployed on is the north Asia to UK and
north continent. Carriers are struggling to raise the spot box rates
this month owing to this fact and in the majority of cases they did
not secure a mid-month rate rise.

The box rate validity was instead extended to June 30 alongside an
average drop of US$50 to $1,350 per forty foot container (FEU) for
these routes in the week ending June 15. 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 per metric ton 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
$399.5/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 declined 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 per cent
capacity but were forced to lower their rates in line with the market
or risk losing some cargo to their rivals.

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 increased by $54.50/mt to $450/mt for
June to date from $395.50/mt for April's monthly average.