Maersk negotiates higher freight rates on back of bunker fuel price surge
- Author:Alex
- Source:Sunny worldwide logistics
- Release Date:2018-02-28
Maersk negotiates higher freight rates on back of bunker fuel price surge
Company Profile:
Sunny Worldwide Logistics is a full-service domestic and international freight forwarder based in China.
Member of WCA ( World Cargo Alliance) , over the last 16 years, we focus on the reliable customer service and competitive transport
Sunny Worldwide Logistics is a full-service domestic and international freight forwarder based in China.
Member of WCA ( World Cargo Alliance) , over the last 16 years, we focus on the reliable customer service and competitive transport
MAERSK Line has been negotiating higher freight rates across all regions to levels above bunker fuel price hikes.
"In what we have signed up so far, across all geographies, we are signing up contracts with increases in rates in excess of the increases we have faced in bunkers," Maersk Line chief commercial officer Vincent Clerc, reported IHS Media.
"We are halfway into the renewal of our contracts, so it is too early to really have a post mortem on how we are doing, but obviously the bunker recovery is very important," said Mr Clerc.
Bunker fuel prices rose 25 per cent in 2017 and cost Maersk US$903 million, a 35 per cent increase on the previous year that pushed unit costs up four per cent, the shipping line said in its 2017 results announcement. The shipping line recorded a $541 million profit for the year.
However, Mr Clerc emphasised that contracts made up only half of the carrier's business, and while higher rates would enable the ocean liner to recoup costs in that area, the other half of the business was independent from the contracted rates.
"It is on the short-term where negotiations are only on price and although bunkers are a factor, the overall asset utilisation plays a bigger role. So it is a negotiation on a week-by-week, or month-by-month basis," he said.
Mr Clerc said that overall the carrier was expecting to renegotiate contracts with an increase.
Maersk Line's rates for 2017 were below the average per FEU levels achieved in 2013 and 2014 when the rate surged past $2,600 per FEU. The rates peaked in the second quarter of 2017 before beginning a slump that lasted for most of the second half and dragged down rates to their lowest level of the year in the fourth quarter.
While rates began to slide after the second quarter, Maersk Line's volume continued to grow. Volume on east-west services grew by 2.4 per cent to 3.77 million FEU, and was up by 2.2 per cent on north-south trades to 5.21 million TEU, and rose by 7.3 per cent on the carrier's intra-regional operations to 1.73 million TEU.
Maersk Line's average rate per FEU in 2017 rose 11.7 per cent to $2,005 per FEU across its global operations, unit costs rose five per cent to $2,079.
The average price of bunker fuel increased by 130 per cent between 2015 and 2017 to $390 a ton in Rotterdam, New York and Shanghai, after dropping to a three-year low of $170 in January 2016, according to IHS Markit data. The price of a barrel of Brent crude in the US rose 12.8 per cent in 2017.
"In what we have signed up so far, across all geographies, we are signing up contracts with increases in rates in excess of the increases we have faced in bunkers," Maersk Line chief commercial officer Vincent Clerc, reported IHS Media.
"We are halfway into the renewal of our contracts, so it is too early to really have a post mortem on how we are doing, but obviously the bunker recovery is very important," said Mr Clerc.
Bunker fuel prices rose 25 per cent in 2017 and cost Maersk US$903 million, a 35 per cent increase on the previous year that pushed unit costs up four per cent, the shipping line said in its 2017 results announcement. The shipping line recorded a $541 million profit for the year.
However, Mr Clerc emphasised that contracts made up only half of the carrier's business, and while higher rates would enable the ocean liner to recoup costs in that area, the other half of the business was independent from the contracted rates.
"It is on the short-term where negotiations are only on price and although bunkers are a factor, the overall asset utilisation plays a bigger role. So it is a negotiation on a week-by-week, or month-by-month basis," he said.
Mr Clerc said that overall the carrier was expecting to renegotiate contracts with an increase.
Maersk Line's rates for 2017 were below the average per FEU levels achieved in 2013 and 2014 when the rate surged past $2,600 per FEU. The rates peaked in the second quarter of 2017 before beginning a slump that lasted for most of the second half and dragged down rates to their lowest level of the year in the fourth quarter.
While rates began to slide after the second quarter, Maersk Line's volume continued to grow. Volume on east-west services grew by 2.4 per cent to 3.77 million FEU, and was up by 2.2 per cent on north-south trades to 5.21 million TEU, and rose by 7.3 per cent on the carrier's intra-regional operations to 1.73 million TEU.
Maersk Line's average rate per FEU in 2017 rose 11.7 per cent to $2,005 per FEU across its global operations, unit costs rose five per cent to $2,079.
The average price of bunker fuel increased by 130 per cent between 2015 and 2017 to $390 a ton in Rotterdam, New York and Shanghai, after dropping to a three-year low of $170 in January 2016, according to IHS Markit data. The price of a barrel of Brent crude in the US rose 12.8 per cent in 2017.