Rising Fuel Costs Impacting Shipping Lines

While global ocean freight rates have continued to decline, steamship lines are having to cope with a recent huge spike in bunker fuel costs.

Ordinarily, rises in fuel costs would be immediately recovered by an uplift in fuel or bunker surcharges. However, with market conditions being as they are, and carriers fighting extremely hard to avoid further erosion of their sales rates due to low demand, the fuel spikes are seemingly inflicting further damage to their bottom lines.

According to reports, the price of low-sulphur fuel jumped by a further $8 per ton last week, and has now risen by 22% since the end of June.

The short term future does not look good for carriers either. Supply cuts driven by the Organization of the Petroleum Exporting Countries (OPEC) have led to analysts forecasting a global deficit of 2m barrels a day in the final quarter of this year, which will likely spark further increases.

While the high cost of fuel is negatively impacting shipping lines rather than importers and exporters at the moment, it is a further indicator that journeys may continue to slow down as longer transit times burn less fuel.

From January 1st 2024, carriers are also expected to meet extended EU’s Emissions Trading System (ETS) regulations, which will require ship operators to pay a contribution for every ton of CO2 emitted by their vessels.

As ever, your Croft Cargo team are monitoring developments.

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