Teu hike in Asia-Europe bunker charges in 2014

Asia-Europe bunker adjustment factors could increase by as much as $120 per teu next year as a result of stricter sulphur regulations.

BAF Drewry MDS Transmodal

Speaking at the Global Liner Shipping conference in Hamburg, Drewry Supply Chain Advisors director Philip Damas warned that the requirement to use fuel with a 0.1 per cent sulphur content in emission control areas such as the North Sea and Baltic Sea would push up the bunker charges implemented by carriers.

Damas said the cost differential between current fuel and low-sulphur fuel is around $300 per tonne. Carriers will therefore need to increase BAF charges on the trade lane by around 20 per cent to cover the increased cost.

He said: “The problem is that today very few carriers are equipped with liquefied natural gas engines, instead they have to use low sulphur marine diesel oil or they have to use scrubbers.

“The impact of this is that the cost per tonne is 50 per cent higher than the current fuel. So it’s a huge increase next year.

“Our best estimates show that bunker adjustment factors will increase by 20 per cent which is an increase of $100-120 per teu.”

Damas said that certain shipping lines were expecting an even higher increase in BAF levels, some expecting increases as high as $500 per teu.

Drewry’s calculations were based on the assumption that one teu would account for around a tonne of fuel on the Asia-Europe trade and that only a certain percentage of the voyage would take place in the North Sea and Baltic Sea ECAs.

Mercator International partner Jesper Kjaedegaard said BAF levels could be even higher as an increase in demand for this type of fuel could drive up prices.

However, MDS Transmodal managing director Mike Garratt said research had shown that the increase in demand was not expected to result in an increase in the price of lower-sulphur fuel.

He expects BAF levels to increase next year by a lower amount than Damas had suggested, although if the Mediterranean also becomes an ECA the amount would be even higher.

Kjaedegaard said other trade lanes were likely to be even more affected by increases in the level of BAF.