Shipping lines ignore calls to cut fuel surcharges

With oil prices plunging to less than $20 per barrel, ocean carriers are coming under increased pressure to cancel their bunker surcharges, but lines are holding firm to emissions targets and cutting operating costs.

Containership owners are continuing with their scrubber retrofit programs despite a dramatic fall in oil prices.

Strict capacity discipline by carriers has supported freight rates to compensate for recent demand slumps, but shippers complain that the lines are still charging BAFs – and IMO 2020 low-sulphur surcharges – in spite of the steep fall in fuel prices.

Despite a reduction in the low sulphur fuel price spread to just $50-70 per ton, containership owners continue to proceed with scrubber retrofit programs, with 20 vessels entering shipyards for retrofitting in April, joining some 35 units that entered the yards in March.

CMA-CGM and Hapag Lloyd rejected suggestions that industry commitments to decarbonise shipping may lose priority in the struggle to rebuild and that the COVID-19 situation will not change the lines overall commitments in reducing CO2 levels materially by 2030 and becoming carbon neutral by 2050.

But the commercial realities of operating large vessel fleets in the current low-demand environment appear to already be testing the environmental resolve of carriers, considering the renewed interest in using the longer — and with the current low price of fuel oil, cheaper — route around southern Africa. 

Demand has all but been erased by the closure of all non-essential businesses and manufacturing across the United States and Europe, creating a cash flow crisis that has the carriers losing $600-$800 million a week.

Faced with growing financial pressure, carriers are desperate to ease the operating costs of the vessels that are required to sail, and with bunker fuel prices falling rapidly over the past month, carriers are again looking at the longer southern route around the southern tip of Africa for ships on the backhaul return from Northern Europe to Asia. 

Maersk and MSC have so far not announced plans to bypass the Suez Canal, but the carriers have said they will extend sailing time on some Asia-North Europe services by seven days.