Home / Uncategorized / Concern Over Global Emergency Bunker Surcharge

 

Members have raised concerns about the announcements from Maersk, CMA CGM and MSC (so far) that they will be introducing a Global Emergency Bunker Surcharge (EBS) in response to the rising cost of fuel.

We note that the Global Shippers Forum (GSF) has issued a statement slamming the surcharge and describing the tactic as amounting to collusion. “Few transport operators in other transport sectors would risk imposing such short-term emergency surcharges because of the likely strong reaction from customers. Container ship operators need to fess up by taking responsibility and greater control of their costs rather than announcing vaguely explained short-notice unrecoverable surcharge costs on customers” said Chris Welsh, retiring GSF Secretary General, in a widely reported statement last week.

The GSF statement goes on to say that it is incumbent on container carriers to provide their customers with full transparency regarding bunker surcharge costs, and to explain why an emergency surcharge is warranted on top of existing bunker surcharge mechanisms. “Shippers will also want to know what steps have been taken to mitigate the impacts of rising fuel prices, including the impacts of fuel hedging arrangements which are designed to manage the risks associated with the single largest cost component of operating container ships. The imposition of emergency surcharges has no place in a modern liner shipping market where costs and prices should be mutually agreed between customers and suppliers, preferably in mutually agreed service contracts. Such arrangements enable the parties to build long term business partnerships, as well as providing clarity on the terms and conditions for the services provided and for appropriate remuneration.”

There is no doubt that higher fuel costs are hurting carriers. Bunker costs have increased by 20 – 30% since the start of the year. In our view there should be a more sustainable mechanism in place to respond to fuel price fluctuations in collaboration with shippers interests. The industry can start to manage this better if shippers/exporters under term contracts seek to have better clarity as to base freight rates and the underlying fuel component, and then build in BAF formulas that are fair and equitable to both parties. Shipping lines need to be prepared to take the risk on the timing and speed of fuel price increases if shippers are prepared to take the risk on paying extra through an agreed mechanism, if fuel prices increase (or decrease as the case may be). There will always be the ‘non-contract’ business that the carriers can levy their EBAF’s etc, however contract business should be treated differently – it’s a relationship issue at the end of the day.

 
 
 
 
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