IMO 2020 sulphur cap: Maersk raises fuel surcharges to cushion cost
Following the implementation of the International Maritime Organisation (IMO) 2020 sulphur cap, Maersk, the Danish shipping operator has imposed bunker surcharges on freight to cushion the effect of high cost of fuel.
Maersk, which is the latest company to implement surcharges, attributed the development to the increased costs associated with very low sulphur fuel oil (VLSFO).
The cost for blended fuel has decreased over the last few days, as seen in the MABUX Index, but the trigger for a bunker and environmental charge is calculated over three months period.
Maersk also notified customers, in an advisory note, that it will raise bunker prices, as their operational costs have significantly increased.
It further says that it had already informed customers during the course of 2019 that the new IMO 2020 regulation would bring a substantial cost increase for ocean shipping.
“Fuel costs would account for larger portion of the total freight rate. At the same time, we also anticipated increased volatility in fuel prices,” says Maersk.
On their parts, shippers have rejected the policy of imposing fuel surcharges on freight.
Jordi Espin, maritime policy manager of European Shippers’ Council (ESC), explained to Container News, “European shippers don’t agree to the standardisation of imposed formulas and costs with any transparency or debate with customers.
“IMO 2020 is a regulation to make the shipping industry cleaner, which we fully endorse. We do not support that it has been taken as a business opportunity and as a tool to decouple service and costs. Service keeps deteriorating with no sign of improvement and costs run wild far ahead with no reference to service,” Espin said.
“Maersk’s Environmental Fuel Fee (EFF) and the Quarterly Bunker Adjustment Factor (BAF) levels are subject to a monthly review and exceptional trigger if the price of compliant fuel (VLSFO – 0.5 percent sulphur fuel oil) moves up or down significantly during the quarter,” according to Maersk.
Maersk explained that “The trigger to activate the exceptional review in both cases is defined as a change of more than US$50/ton (up or down) on bunker prices compared to the last time both surcharges were adjusted.”
In recent months, VLSFO prices increased substantially. In particular, VLSFO prices in Asia (Singapore) exceeded US$700/ton for a period, a more than 20 percent increase compared to the previous bunker prices used for the BAF and EFF calculation. The average increase in January is expected to exceed US$50/metric ton.
Accordingly, Maersk will apply the additional monthly trigger defined in its BAF and EFF formulas and the new tariffs will be effective 1 March 2020.
It was said that Maersk uses Bunker world’s fuel price index 0.5 percent Sulphur fuel oil (VLSFO) for the BAF and EFF calculation. The period used for the calculation will be 26 December 19 to 25 January 2020.
Also, the tariff increase will be seen across all trades with an increase range between US$50-200/40-foot equivalent unit, reflecting the increased fuel costs associated, seen during recent weeks.
According to Maersk, the actual increase per trade will be communicated to shippers by end of January.