To ease cost pressures, the Mediterranean Shipping Company announced a temporary measure to deal with the rising prices. The Company imposed an emergency Bunker adjustment factor around the world due to rise in fuel prices. That has dramatically affected the Container Shipping Company’s operational environment.
In a note to customers, the container shipping line said it would impose a ‘global provisional Bunker adjustment factor’ on all sea and land cargoes effective immediately. However, the Shipping Company did not disclose the amount of the surcharge.
“The decision came into effect as soon as the cost pressures from rising fuel prices were taken into account. Normal operations cannot be guaranteed without urgent action being taken.” Read a statement posted on the official website of Mediterranean shipping on May 21. (Related Article: How to keep low shipping costs to ship the products to your customers for Amazon Sellers )
As of June 1, Maersk will begin adding EBS; a small cabinet of $50 and a large cabinet of $100 on all routes without exception! Secondly, the US, Puerto Rico and the American Samoa region of Samoan Islands’ Columbia, Taiwan will also start collecting the fees as from July 1.
More shipping companies apart from the MSC and Maersk are also preparing to levy the fees starting June. All freight forwarders should remember to add the calculation cost whether operating as overseas buyers or you’re the owner of the quotation.
The recent surge in fuel prices is likely to cost the industry $1.3 billion this year. At the same time, the Mediterranean shipping has announced temporary Bunker adjustment factor to ease cost pressures.
Explaining the reasons behind the Bunker adjustment factor, Mediterranean said that the price of marine fuel in Europe had exceeded $442 a tonne as of last week. This is the highest level since 2014 and up more than 30 percent this year. Crude oil is trading at $80 a barrel which is also the highest since 2014.
“There will be no guarantee of normal operations unless urgent action is taken.” This is according to Mediterranean Shipping report released last week by Maersk Line (a partner of the Mediterranean Shipping Company’s 2M alliance). The report further shows that the average cost of marine fuel rose 19 percent to $382 a tonne in the first quarter of 2018 compared to the same period last year.
The rising cost of fuel has led to a $580m cash flow loss for trucking companies this year according to one analyst Seaintel. This loss is expected to reach $1.3 billion by the end of the year. He also indicated that the current level of freight prices is not enough to offset soaring fuel costs. Prices will have to rise by 12-15 percent over the next six months to compensate for the negative impact of higher oil prices.
According to this report, “the Bunker adjustment factor is a measure of last resort that will respond to these challenges stably and sustainably while continuing to provide high-quality services to all customers.” The company will also keep assessing long-term strategies to ease the current situation.
Since Mr. Trump announced a new round of sanctions against Iran, global oil prices have continued to soar, and the cost of fuel for the shipping industry has risen. Profits at companies such as Maersk and Hyundai, which reported first-quarter results, have suffered.
In less than a week as of today morning, 9 major shipping companies have announced the Bunker adjustment factor fee and enforcement time for their emergency Bunker adjustment factor.
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