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CARRIERS could benefit from another surge in freight later this year as shippers seek to frontload cargo ahead of the imposition of higher surcharges for fuel ahead of the imposition of IMO2020 low-sulphur rules.
Speaking at the Cargo Logistics Canada Expo + Conference in Vancouver, Hackett and Associates partner Daniel Hackett said prices were likely to rise from October as carriers converted to low-sulphur fuel in order to be ready for the January 1, 2020 deadline for using 0.5% sulphur bunkers.
“We expect to see a price increase of between $100-$200 per teu from Asia to North America,” Mr Hackett said. “That is enough to have some retailers and importers consider importing volumes ahead of that date, so we may see a surge in July-September this year.”
Any price surge would depend on how costs were assigned, and whether beneficial cargo owners ended up paying or higher prices were mitigated in other ways.
“That is one of the big questions that is going to be facing us in 2019,” he said.
Bill Payne, an independent consultant and former vice-chairman of NYK Line, said it remained unclear how the increase in costs would be covered.
“The difficulty with the fuel discussion is that it is not homogenous,” Mr Payne said. “There isn’t a Transpacific Stabilization Agreement discussion on it. How do you get to a formula that the shipping community can agree to?”
It was up to shippers with confidential contracts to decide whether bunker adjustment mechanisms were transparent.
“I don’t think any customer is going to be tolerant enough to listen to a shipping company dictating what they will pay,” he said. “I think it will be an average of averages.”
Nevertheless, the fuel price would go up, he added.
“I’ve seen some shippers challenge this and say ‘fuel has always been in my rate and I’m not going to pay for it separately’. But back in 2008, when we got to an all-in rate of below $1,000 per teu, the ships stopped running.”
He urged both sides of the debate to share data, share the difficulty and be fair with each other.
“Failing that, ships will be idled and the supply chain will be disrupted.”
“Economic game theory and the prisoner’s dilemma drives a lot of pricing,” Mr Payne said. “If I have a large commitment to more ships I need to be sharper on my rate to fill my ship. But the cost of fuel should not be weaponised.”
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February 12, 2019