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June 11 2018

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14 The Journal of Commerce | June 11 2018 www.joc.com International Maritime CMA CGM BECAME the third carrier to implement "emergency bunker recov- ery measures" after 2M Alliance mem- bers Maersk Line and Mediterranean Shipping Company (MSC) said they would start changing an emergency bunker surcharge from June 1. Rodolphe Saade, group CEO of CMA CGM, made the bunker sur- charge announcement while report- ing his carrier's first-quarter results. CMA CGM recorded strong growth in first-quarter revenue and volume, even as it operated in an environment described as "highly deteriorated" with rising bunker fuel costs and an unfavorable euro-US dollar exchange that dragged the container line to a net loss of $77 million. "The shipping industry is experiencing sustained growth but was hit in the first quarter by the sharp increase in bunker prices," Saade said. "In this environment, CMA CGM succeeded in recording a strong increase both in volumes transported and in revenue, while maintaining a positive core EBIT margin, thus demonstrating once again the relevance of our strate- gy. Volumes should remain high throughout the year." CMA CGM's revenue rose 17 per- cent to $5.41 billion while container volume grew 15 percent to 4.95 million TEU. The industry trend of rising revenue and volume while recording a net loss was repeated across several carriers during the first quarter, with bunker price increases eroding what could otherwise have been a more positive period. Despite a 7 percent increase in average freight rates, Maersk Line in May reported an underlying loss of $220 million in continuing operations in the first quarter that it blamed largely on the rising cost of fuel. And there was pain at many other ocean carriers that reported first-quarter losses. Hapag-Lloyd lost $40.5 million in the first three months of the year; Yang Ming Line lost $67 million; Hyundai Merchant Marine report- ed a loss of $164 million; and Zim Integrated Shipping Services posted a $21.6 million loss even though its volume rose 16 percent. Maersk Line imposed a $60 per TEU and $120 per FEU bunker sur- charge on all cargo globally effective June 1 on non-Federal Maritime Commission corridors, and from July 1 on FMC corridors. "The increase in bunker price in 2018 has been significantly higher than what had been expected and has now reached a level of $440 per ton in Europe, the highest since 2014. The increase is more than 20 percent compared to the begin- ning of 2018 and this unexpected development means that it is no lon- ger possible for us to recover bunker costs through the standard bunker adjustment factors," Maersk Line announced in a customer advisory. MSC said fuel prices are up more than 30 percent this year, and almost 70 percent since last June. The carrier said crude oil was hovering around $80 a barrel — the highest since 2014 — and "emergen- cy action" was required. "MSC is therefore introducing a worldwide temporary emergency bunker surcharge on all ocean and land-based cargo carriage with imme- diate effect. This last-resort mea- sure is essential to ensure that we navigate these challenging economic conditions in a steady and sustainable way and continue to provide a high quality of service to all our Fueling surcharges High bunker prices slam carrier results despite growth in revenue and volume By Greg Knowler Bunker price increases have eroded what would have been a positive first- quarter for ocean carriers. Shutterstock.com Importing & Exporting | Ports | Carriers | Breakbulk | Global Logistics

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