Just when you think shipping costs can’t go higher, increasing fuel cost are going to push prices up for shippers.

Just when you think shipping costs can’t go higher, increasing fuel cost are going to push prices up for shippers.

The price of Brent crude topped $72 per barrel Thursday, with West Texas Intermediate above $70. As the price of oil goes, so goes the price of marine fuel. And that means higher costs for ship operators, and in the case of the container sector, more fuel surcharges passed along to cargo shippers.

Higher bunker (marine fuel) costs affect different shipping segments differently. American Shipper looked at each segment, and for a broader perspective on where pricing will go next, interviewed Richard Joswick, head of global oil analytics at S&P Global Platts.

How shippers of containerized goods are affected
In the container sector, liner companies pass along higher fuel costs via a bunker adjustment factor (BAF). Carrier filings of BAFs to Distribution Publications Inc. (DPI) show that BAFs plunged in Q3 2020, after the COVID-induced collapse in oil price, and have been ramping back up ever since.

Asia-West Coast BAFs of carriers CMA CGM, COSCO, Evergreen and OOCL that have already been filed for Q3 2021 are up by an average of $229 per forty-foot equivalent unit (FEU) or 69% versus the same period last year. Asia-East Coast BAFs of these four carriers for the third quarter are up an average of $409 per FEU or 78% year on year.

In normal times, such price increases would garner more attention. But in the current situation, where shippers are often paying well over $10,000 per FEU from Asia to the U.S., the rising BAF is a drop in the bucket.

Steve Ferreira, founder and CEO of Ocean Audit, told American Shipper, “Two years ago, this would have been a bigger story. Now, for shippers, it’s just another nail in the coffin. At this point, I don’t even think the logistics folks are paying attention to bunkers. I think the BCOs [beneficial cargo owners] should do a better job of negotiating BAFs, given the egregious rates they’re paying.”

Ferreira also said that BAFs being offered by non-vessel-operating common carriers (NVOCCs) are “substantially higher” than what liners are posting for the same dates and routes. “They [NVOCCs] are marking it up,” he claimed.

To read more about it in Freightwaves.com : click here

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