As bunker price rises, liners warn of higher fares
Cosulich: “Bunker price will further increase in the long term when IMO new regulations will be enforced in 2020”
Bunker price is rising while the results recorded by shipping companies, especially the ones operating in containers sector, have drastically dropped.
The three major global carriers, namely Maersk, MSC and CMA CGM (followed by other renowned players like ONE, Japanese consortium of shipowners), have recently announced a temporary emergency bunker surcharge, needed to offset bunker price increase – as stated by MSC on May 21st – “which soared by 30% versus early this year and 70% versus June 2017”.
Major liners, or at least Maersk and CMA CGM's quarterly reports were badly hurt (MSC does not publish any economic-financial report).
Despite having recorded growing revenues with Ocean (founded by Maersk Line, Hamburg Sud and APM Terminals), the Danish shipping giant was affected by 220 million dollars loss in 1Q 2018 to grant business in continuity, however reaching 3 billion dollars if we consider former businesses and particularly due to overall 2.6 billion dollars profit generated by selling Maersk Oil to Total.
However, bunker price particularly affected the group's economic trend – deemed “unsatisfactory” by CEO Soren Skou; in 1Q 2018 Maersk spent 1.1 billion dollars in bunker for ocean lines, versus 789 millions spent in 1Q 2017.
Even French CMA CGM, ranked third, after MSC, in the global ranking, recorded growing revenues in 1Q 2018, 67,2 million dollars negative results versus 91.7 million dollars recorded in 1Q 2017, while bunker price soared from 560 million dollars to 788 millions.
A real emergency as the 'temporary emergency surcharge' envisaged by shipping companies attempting to smooth current negative effects generated by bunker price increase.
As told Ship2Shore by Timothy Cosulich, controlling Genoa-based group's bunker trading and supply business from Singapore, “Bunker price grew progressively but liners can't amend fares on a daily basis, they adjust fares when bunker price has reached stable figures”.
Considering the announced fare increase, according to Cosulich this occurrence might take a long time: Disregarding crude price increase, the situation will go worse after enforcement of the new IMO regulations on sulphur emissions in 2020 therefore also heavily affecting bunker prices”.