maersk

MSC, CMA CGM Present Plans for Fuel Surcharges

Following the footsteps of Maersk Line, the Swiss and French container shipping giants MSC and CMA CGM have unveiled their intention to introduce a new fuel adjustment surcharge ahead of the 2020 sulphur cap.

Mediterranean Shipping Company plans to introduce a new Global Fuel Surcharge as of January 1, 2019. The company expects its operating costs to increase significantly in preparation for the 2020 low-sulphur fuel regime.

MSC said that the cost of the various changes to the fleet and its fuel supply is in excess of USD 2 billion per year, the same as with Maersk Line.

“The new MSC Global 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.”

Separately, CMA CGM informed that it decided to favor the use of 0.5% fuel oil for its fleet, and to invest significantly by using LNG to power some of its future container ships, and by ordering several scrubbers for its ships.

The company said that all these measures represent a major additional cost estimated, based on current conditions, at an average of 160 USD / TEU. The additional cost will be taken into account through the application or adjustment of fuel surcharges on a trade-by-trade basis, CMA CGM explained.

“The implementation of this new regulation, which represents a major environmental advance for our sector, will affect all players in the shipping industry. In line with its commitments, the group will comply with the regulation issued by the IMO as from 1 January 2020. In this context, we will inevitably have to review our sales policy regarding fuel surcharges,” Mathieu Friedberg, Senior Vice President Commercial Agencies Network, said.

The new International Maritime Organization (IMO) Low Sulphur Regulation will be effective from 1 January 2020 and will require all shipping companies to reduce their sulphur emissions by 85%.

Sulphur content in the fuel used for international shipping will have to be limited globally to 0.5%, compared with the current standard of 3.5%, in order to minimize the emissions.

However, Shippers have joined forwarders in condemning Maersk’s plan, pointing out that as the charge is per box, those shipping west with higher charges will end up paying for more collectively than they need to, to compensate for empties returning east. As  a result, the most profitable routes will enjoy higher-than-average surcharges.

In addition, Maersk is introducing the scheme a year before the higher fuel prices come in.

“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,” said James Hookham, secretary general  of the Global Shippers’ Forum.

“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.”

He added that Maersk could have chosen to fit scrubbers on all its ships, triggering a one-off expense, as some of its rivals are doing.

“For shippers, this is a better option than paying sulphur surcharges indefinitely.”

But he added that the unilateral manner in which Maersk introduced the change had also upset its customers.

“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.

“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 the strategy. These new charges may be all about low-sulphur fuel, but they still stink to us!”

Last week forwarders also revealed their anger over the “very major increases”.

“Rises of this magnitude are unjustified, and could be construed as blatant profiteering by shipping lines determined to exploit the situation,” said BIFA director general Robert Keen.

Source: The Loadstar / World Maritime News