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January 20 2020

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16 The Journal of Commerce | Januar y 20 2020 www.joc.com International Maritime Down 10% from Jan. 2018 Down 15.4% from Jan. 2018 $1,100 $1,300 $1,500 $1,700 $1,900 $2,100 $2,300 $2,500 $2,700 $2,900 $3,100 Mar.01 (Week 9) Mar.15 (Week 11) Mar.29 (Week 13) Apr.12 (Week 15) Apr.26 (Week 17) May.17 (Week 20) May.31 (Week 22) Jun.14 (Week 24) Jun.28 (Week 26) Jul.12 (Week 28) Jul.26 (Week 30) Aug.09 (Week 32) Aug.23 (Week 34) Sep.06 (Week 36) Sep.20 (Week 38) Oct.11 (Week 41) Oct.25 (Week 43) Nov.08 (Week 45) Nov.22 (Week 47) Dec.06 (Week 49) Dec.20 (Week 51) Jan.03 (Week 1) Shanghai to US East Coast Shanghai to US West Coast Trans-Pacific spot rates rise on IMO 2020 surcharges Source: Shanghai Shipping Exchange © 2019 IHS Markit Shanghai Containerized Freight Index rate per FEU A JUMP IN eastbound trans-Pacific container spot rates in early January suggests carriers are recouping at least some of the higher operating costs tied to the global low-sulfur fuel mandate, but shippers say they're still struggling to determine how much more they're paying for fuel. Jon Monroe, a consultant to non-vessel-operating common carri- ers (NVOs), said although all-inclusive spot rates that a half-dozen carriers quoted from Asia to the United States on Jan. 3 were roughly similar, the bunker fuel components ranged from as little as $30 per FEU to as much as $327 per FEU. Carriers quoting the higher fuel rates are lowering the base ocean rate, so the end result is an all-in rate that doesn't vary signifi- cantly from carrier to carrier. "This is all very difficult to under- stand. The swings are pretty wide. It leaves the impression that someone is trying to make money on the fuel component," a transportation consul- tant and former logistics executive at a national retailer who did not want to be identified told The Journal of Commerce. In their defense, carriers are grappling with new fuel types that have yet to settle in terms of medium-term price and supply, and antitrust rules prevent them from creating an industry-wide bunker fuel adjustment factor (BAF). And even if there were a BAF guide like the one provided by the now-defunct Transpacific Stabilization Agreement, carriers are operating vastly different fleets in terms of number, size of ship, and scrubbers installed. Carrier representatives have noted recently that they anticipated the initial roll-out of low-sulfur fuel oil (LSFO) charges would be "messy," but the industry would work through the challenges collaboratively. 'Overly complex' The complexity of fuel pricing ramped up further on Jan. 2, when Iranian General Qasem Soleimani was killed in a US airstrike in Baghdad, sending crude oil prices 3 percent higher. Iran's expected retaliation will further rattle global oil markets, caus- ing the price of bunker fuels to jump, which will have an impact on all-in spot rates in the container shipping sector. As of Friday, Jan. 3, the all-in spot rate from Asia to the US East Coast was $2,808 per FEU, an increase of 9.6 percent from the previous week, but a decrease of 15.4 percent from the same week in 2019, according to the Shanghai Containerized Freight Index (SCFI). The Asia–US West Coast spot rate was $1,636 per FEU, up 14.1 percent sequentially but down 10 percent year over year. According to DSV Solutions, the total BAF, which reflects the new fuel cost on top of the existing BAF, will be $1,206 per FEU to the East Coast and $717 per FEU to the West Coast come Feb. 1. The East Coast BAFs are higher because of the longer distance in voyages from Asia compared with those from Asia to the West Coast. "Container freight rates continue to push higher on the back of successful bunker surcharges to cover higher fuel costs under IMO 2020, a tightening market, with 6 percent of capacity idle for scrubber retrofits, and a pickup in demand ahead of Chinese New Year," Importing & Exporting | Ports | Carriers | Breakbulk | Global Logistics Glass half fuel Carriers exacting some IMO surcharges, but scale unclear By Bill Mongelluzzo "The swings are pretty wide. It leaves the impression that someone is trying to make money on the fuel component."

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