The Global Shippers Forum (GSF) said it is suspicious of Maersk’s announcement of a fuel surcharge beginning Jan. 1 “to recover presumed costs from the introduction of low-sulphur marine fuel.”
“Based on the information released by Maersk, the new charges, which are additional to agreed contract rates, are based on two factors: an average cost of fuel and a ‘trade factor’ that upscales the costs on head trades and discounts the fuel cost on reverse trades,” GSF said in a press release. “But because the charge is per box, the greater number of revenue-earning boxes sailing west will collectively pay far more than they need to in order to compensate for the same boxes returning east when empty.”
The new International Maritime Organization low-sulphur regulation will take effect Jan. 1, 2020, and will require all shipping companies to reduce their sulphur emissions by 85 percent.
GSF said Maersk will in effect be applying higher-than-average surcharges on its most profitable routes.
“For example, the Far East-to-North Europe route has a trade factor of 1.3, but North Europe to Far East of 0.7,” the press release said. “In addition, Maersk has decided to help itself to a whole year of higher fuel surcharges, a full 12 months before the rules requiring them to use surcharges actually come in. And the new charging structure would apply to all variations of fuel price, not just due of the introduction of low-sulphur fuel.”
James Hookham, GSF secretary general, said, “Asking customers to contribute to new environmental costs is to be expected, but this charge lacks transparency. No data is available to let customers work out how the charge has been calculated. Given historical experiences with surcharges, shippers are naturally suspicious over something shipping lines say is ‘fair, transparent and clear.’
“GSF will be taking this piece of financial engineering apart piece by piece as we suspect this has more to do with rate restoration than environmental conservation,” Hookham said.
“Maersk has other options. Global rules allow lines to meet air-quality standards by fitting ‘scrubbers’ to clean up exhaust emissions, rather than buying more expensive low-sulphur fuel. This requires a one-off capital expense, but for shippers this is a better option than paying sulphur surcharges indefinitely,” he continued. “Some of Maersk’s biggest competitors are taking this different approach, and customers will be looking at the options and voting with their wallets.
“What also disappoints shippers is the lack of negotiation about the timing and the structure of the charge. It would have been better if Maersk had discussed its plans with individual customers in the course of confidential contract reviews rather than just publishing something that wouldn’t be out of place in the puzzles section of your daily newspaper,” Hookham said.
“We suspect that other shipping lines will be tempted to follow suit, but it would surely be of concern to competition authorities around the world if the same formula were to be used by other shipping lines, especially in the same alliance.
“GSF would encourage Maersk to consult with customers and reconsider their strategy,” he said. “These new charges may be all about low-sulphur fuel, but they still stink to us.”
CMA CGM and MSC have in fact followed suit.
CMA CGM announced Monday that to cover the costs of reducing sulphur emissions it will apply or adjust fuel surcharges on a trade-by-trade basis.
“CMA CGM has decided to favor the use of 0.5 percent fuel oil for its fleet and to invest significantly,” the company said.
That investment calls for using LNG to power some of its future containerships, “notably resulting in a 99 percent reduction in sulphur emissions,” and by ordering scrubbers.
“All these measures represent a major additional cost,” estimated on average of $160 per TEU, CMA CGM said.
“The implementation of this new regulation, which represents a major environmental advance for our sector, will affect all players in the shipping industry,” said CMA CGM, adding that it will comply with the 2020 deadline.
“In this context, we will inevitably have to review our sales policy regarding fuel surcharges,” said Mathieu Friedberg, senior vice president of CMA CGM’s commercial agencies network.
MSC said Monday its operating costs are expected to increase significantly as it prepares for the low-sulphur fuel mandate and it therefore is introducing a new global fuel surcharge as of Jan. 1 “to help customers plan for the impact of the post-2020 fuel regime.”
The new fuel surcharge “will replace existing bunker surcharge mechanisms and will reflect a combination of fuel prices at bunkering ports around the world and specific line costs such as transit times, fuel efficiency and other trade-related factors,” MSC said.
In its announcement Monday, MSC noted, “The cost of the various changes we are making to our fleet and its fuel supply is in excess of $2 billion per year.
“MSC operates a modern, green fleet and seeks to operate in a sustainable and responsible way, guided by social and environmental values in its business plans and practices. The company is committed to contributing to global efforts to reduce ship emissions and fully supports the U.N. IMO’s work in this area.”
“Based on the information released by Maersk, the new charges, which are additional to agreed contract rates, are based on two factors: an average cost of fuel and a ‘trade factor’ that upscales the costs on head trades and discounts the fuel cost on reverse trades,” GSF said in a press release. “But because the charge is per box, the greater number of revenue-earning boxes sailing west will collectively pay far more than they need to in order to compensate for the same boxes returning east when empty.”
The new International Maritime Organization low-sulphur regulation will take effect Jan. 1, 2020, and will require all shipping companies to reduce their sulphur emissions by 85 percent.
GSF said Maersk will in effect be applying higher-than-average surcharges on its most profitable routes.
“For example, the Far East-to-North Europe route has a trade factor of 1.3, but North Europe to Far East of 0.7,” the press release said. “In addition, Maersk has decided to help itself to a whole year of higher fuel surcharges, a full 12 months before the rules requiring them to use surcharges actually come in. And the new charging structure would apply to all variations of fuel price, not just due of the introduction of low-sulphur fuel.”
James Hookham, GSF secretary general, said, “Asking customers to contribute to new environmental costs is to be expected, but this charge lacks transparency. No data is available to let customers work out how the charge has been calculated. Given historical experiences with surcharges, shippers are naturally suspicious over something shipping lines say is ‘fair, transparent and clear.’
“GSF will be taking this piece of financial engineering apart piece by piece as we suspect this has more to do with rate restoration than environmental conservation,” Hookham said.
“Maersk has other options. Global rules allow lines to meet air-quality standards by fitting ‘scrubbers’ to clean up exhaust emissions, rather than buying more expensive low-sulphur fuel. This requires a one-off capital expense, but for shippers this is a better option than paying sulphur surcharges indefinitely,” he continued. “Some of Maersk’s biggest competitors are taking this different approach, and customers will be looking at the options and voting with their wallets.
“What also disappoints shippers is the lack of negotiation about the timing and the structure of the charge. It would have been better if Maersk had discussed its plans with individual customers in the course of confidential contract reviews rather than just publishing something that wouldn’t be out of place in the puzzles section of your daily newspaper,” Hookham said.
“We suspect that other shipping lines will be tempted to follow suit, but it would surely be of concern to competition authorities around the world if the same formula were to be used by other shipping lines, especially in the same alliance.
“GSF would encourage Maersk to consult with customers and reconsider their strategy,” he said. “These new charges may be all about low-sulphur fuel, but they still stink to us.”
CMA CGM and MSC have in fact followed suit.
CMA CGM announced Monday that to cover the costs of reducing sulphur emissions it will apply or adjust fuel surcharges on a trade-by-trade basis.
“CMA CGM has decided to favor the use of 0.5 percent fuel oil for its fleet and to invest significantly,” the company said.
That investment calls for using LNG to power some of its future containerships, “notably resulting in a 99 percent reduction in sulphur emissions,” and by ordering scrubbers.
“All these measures represent a major additional cost,” estimated on average of $160 per TEU, CMA CGM said.
“The implementation of this new regulation, which represents a major environmental advance for our sector, will affect all players in the shipping industry,” said CMA CGM, adding that it will comply with the 2020 deadline.
“In this context, we will inevitably have to review our sales policy regarding fuel surcharges,” said Mathieu Friedberg, senior vice president of CMA CGM’s commercial agencies network.
MSC said Monday its operating costs are expected to increase significantly as it prepares for the low-sulphur fuel mandate and it therefore is introducing a new global fuel surcharge as of Jan. 1 “to help customers plan for the impact of the post-2020 fuel regime.”
The new fuel surcharge “will replace existing bunker surcharge mechanisms and will reflect a combination of fuel prices at bunkering ports around the world and specific line costs such as transit times, fuel efficiency and other trade-related factors,” MSC said.
In its announcement Monday, MSC noted, “The cost of the various changes we are making to our fleet and its fuel supply is in excess of $2 billion per year.
“MSC operates a modern, green fleet and seeks to operate in a sustainable and responsible way, guided by social and environmental values in its business plans and practices. The company is committed to contributing to global efforts to reduce ship emissions and fully supports the U.N. IMO’s work in this area.”
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