The actual low-sulfur fuel surcharge cost per container shippers can expect to be applied to their spot market cargo on the major trades is finally beginning to heave into view.
Four major carriers have in the last week announced in customer advisories that from Dec. 1, low-sulfur surcharges will be applied to containers shipped on both spot rates and all contracts with a duration of less than three months. Most carriers already have Bunker Adjustment Factor (BAF) formulas in place for cargo shipped under longer contracts.
While the surcharges all cover the additional cost of IMO 2020 compliant fuel, each carrier calls them by a different name. For Maersk Line, it is the Environmental Fuel Fee (EFF), Hapag-Lloyd is calling its surcharge the IMO 2020 Transition Charge (ITC), HMM has labeled theirs the Environmental Compliance Charge (ECC), while CMA CGM has gone with Low Sulfur Surcharge (LSS20).
Of the four carriers, CMA CGM and HMM gave an actual amount per container, with CMA CGM going as far as offering a useful low-sulfur fuel tariff calculator. Shippers can input origin and destination ports to get an actual low-sulfur surcharge per box being moved on that route, along with the usual breakdown of the multitude of other tariffs and charges involved in every ocean shipment.
HMM did not provide a tariff calculator in its customer advisory, but the carrier did outline its low-sulfur surcharges to be applied on the various trades. Maersk and Hapag-Lloyd on Nov. 1 announced a low-sulfur surcharge targeting the spot and short-term markets from Dec. 1, but neither carrier gave an amount per TEU.
Using the methods provided by CMA CGM and HMM, the following low-sulfur surcharges will be levied on these major east-west trade lanes:
China-US West Coast (per FEU)
CMA CGM: $108
SCFI spot rate as of Nov. 1: $1,588
China-US East Coast (per FEU)
CMA CGM: $352
SCFI spot rate as of Nov. 1: $2,604
China-North Europe (per TEU)
CMA CGM: $120
SCFI spot rate as of Nov. 1: $707
As a percentage of the spot rate, China to North Europe is the highest at about 16 percent, while the China-United States trades range from 7 percent to 14 percent. The surcharges are based on the spread between the price of high-sulfur and low-sulfur fuel through October, so how they play out over the next few months will depend on whether that spread widens.
The high-low spread is currently at $173, with high-sulfur trading on Nov. 4 at $337 per ton, and low-sulfur at $510 per ton.
For DSV Panalpina CEO Jens Bjorn Andersen, the different surcharge levels are an example of how the free market is working. “There will not be one tariff that applies to everyone because that is not what we want. We want competition between the shipping lines,” he told JOC.com recently at the forwarder’s head office near Copenhagen.
“We understand that any surcharge for a shipper is an additional fee that needs to be paid, but also you need to remember that compared to the value increase in most commodities, transport costs are proportionally low.”