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June 25 2018

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June 25 2018 | The Journal of Commerce 11 www.joc.com Cover Story reporting first-quarter losses after the industry earned an operating profit of $7 billion — the highest amount since 2014, according to industry analyst Drewry — shipper skepticism of the true driver of such surcharges is rampant. "If you have an agreement, you should stick to it. We are not in a war, we are not in an oil crisis. There is no emergency, so there is no need for an emergency bunker surcharge," Fabien Becquelin, maritime policy manager for the European Shippers' Council, told The Journal of Com- merce. "Both parties should take into account the possibility that the bun- ker price could go up again. The carri- ers should hedge their fuel costs." Ocean carriers counter that not only have fuel prices spiked to levels they couldn't have predicted, but that ship chartering and US trucking costs have, too. The average cost of IFO 380 bunker fuel per metric ton across the ports of Shanghai, Rotterdam, and New York-New Jersey is up 67.2 percent from the January 2016 low of $146, and has risen 19.4 per- cent to $445 per ton from the start of April to June 8, according to IHS Markit data. That spike still pales in com- parison to the one in 2008 when the price of crude oil reached $140 a barrel and bunker fuel, $667 per metric ton ($735 per ton). Crude oil per barrel has traded in a $65 to $75 range since the start of the year, and IHS Markit forecasts prices will rise 18.4 percent from April's average price of $71.80 per barrel to a peak of $85 in July and August before falling to $81 by October. West Texas Intermediate Crude traded on June 11 up 33 cents to $66.07 a barrel. Fuel costs account CONTAINER LINES FACE a steep chal- lenge in recouping emergecy bunker fuel and peak-season surcharges because contractual agreements limit shippers' exposure and compe- tition among carriers gives shippers leverage in rejecting any "emer- gency" fees. Alternatively, shippers can threaten to take their cargo to another carrier and take action if they don't get their way. Contract clauses forbidding gen- eral rate increases, peak-season sur- charges, and other ancillary charges shield shippers from the new fees sought by carriers, but it's unclear whether the "emergency" element of the newest wave of surcharges will puncture this contract armor. Non-vessel-operating common carri- er (NVO) contracts where forward- ers don't detail named accounts are subject to such fees, a move some see as an effort by carriers to essen- tially use NVOs as their sales team. For carriers dealing primarily with beneficial cargo owners (BCOs) directly, and NVOs with named accounts, only 30 percent of the cus- tomers pay the surcharges, container line executives told The Journal of Commerce. For some carriers, it could be 40 percent. However, for shipping lines that rely mostly on NVOs for their cargo base, as many as 60 percent of the contracts can be open to surcharges. Although the wrangling between shippers and carriers over surcharges isn't new, the number of surcharges levied by carriers, from those tied to the US trucking sector's electronic logging device (ELD) mandate to freight-all-kind (FAK) fees, has risen in the last nine months. With many carriers fresh off a lackluster con- tracting season for the Asia-Europe and trans-Pacific trades and some Container lines and shippers clash over emergency bunker fuel surcharges By Greg Knowler and Bill Mongelluzzo

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