Hapag-Lloyd updates low sulfur fuel charges for Asia-North America trades

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Hapag-LloydHamburg-based container ocean carrier Hapag-Lloyd announced it will revise its low sulfur fuel (LSF) charge in response to a change in global maritime pollution (Marpol) rules that lower the cap on sulfur oxide emissions to 0.1 percent.

The revised rules of Marpol 73/78, the International Convention for the Prevention of Pollution From Ships, are requiring ocean carriers to switch to cleaner but more expensive marine gas oil (MGO) and, in some cases, additional retrofitting of vessels for segregated storage of the fuel.

Hapag-Lloyd said the change in the low sulfur fuel charge will apply on all trades from East Asia and Indian Sub-Continent origins to all Canada and U.S. destinations.

The new LFS charge takes effect January 1, 2015 and will be adjusted quarterly based on a 13-week average of weekly prices.

“In the absence of firm loading prices for MGO in Asia, the new formula will base its East and West Coast charges on weekly loading prices for New York and Los Angeles, respectively, as posted by Bunkerworld,” said the German box shipping line in a statement.

Under the new formula, initial LSF charges will be US$67 per 40-foot unit for cargo to and via East Coast against the current $17 per 40-foot, and $53 per 40-foot for cargo to and via the West Coast from the present $16.

Charges for 20-foot containers (TEUs) will be assessed at 90 percent of FEU levels.

At the same time, Hapag-Lloyd has adjusted the basic bunker charge formula to reflect larger, more fuel-efficient ships with increased effective capacity entering the trade; longer transit times and different consumption rates as a result of slow steaming; routing and schedule adjustments created by vessel-sharing alliances; and other factors.

These differences primarily affect the price sensitivity for each $20 movement up or down in the average fuel price, which in turn will also result in some adjustments to the basic charge matrix, the company said.

Hapag-Lloyd is a member of the Transpacific Stabilization Agreement (TSA), a research and discussion forum of major container shipping lines serving the trade from Asia to ports and inland points in the U.S., which earlier announced its group will apply a new formula for calculating low sulfur fuel charges, adjust basic bunker charges, and implement intermodal door delivery charges in reaction to new cost developments in the industry.

Variations in low sulfur charges

Drewry Maritime Research, meanwhile, explained in a new report that carriers will be obligated to use fuel with maximum 0.1 percent sulfur content, down from today’s allowed 1 percent, in so-called emission control areas in North Europe and North America from January 1 when the new low sulfur fuel environment regulations come into force.

With this, carriers will be collecting low fuel surcharges or emission control area charges in addition to ocean freight, and Drewry predicts variations in low fuel surcharges by geography and by trade. They range from $30 per 40-foot container for Asia to/from North West Europe to $280 per 40-foot container for Baltic region to/from Canada East Coast.

For the high-volume, big-ship routes between Asia and both North West Europe and the U.S., the surcharges are low and represent only a marginal increase on current freight costs, said Drewry.

However, for the trans-Atlantic trade lane, the low sulfur surcharges of at least $120 per 40-foot represent an extra cost of some 6% to 12% on top of existing, typical all-in spot rates of about $1,000 eastbound and $2,000 westbound (including terminal handling charges).

The new low sulfur surcharges also vary by carrier. On the Asia-Europe trade, the surcharges of the three largest carriers are very close. On the trans-Atlantic route, surcharges vary widely between carriers, with MSC being more costly.

Said Drewry: “Carriers will need to provide transparent cost calculations to exporters and importers to justify the cost surcharges which they have announced from January. Carriers do face additional costs to meet the tighter pollution rules, but may have a difficult task convincing big shippers to pay a separate low-sulphur surcharge.”

Photo: Buonasera