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Ocean Shippers Impose Fuel Surcharges as Oil Prices Spike

Major ocean freight carriers have instituted “emergency bunker recovery measures” to counter a hike in the price of the main source of fuel for container ships.

CMA CGM on Friday joined 2M Alliance members, Maersk Line and Mediterranean Shipping Company (MSC), in implementing the surcharge.

“Due to the significant increase in bunker prices since the beginning of the year and to keep ensuring the highest quality of service to its customers, CMA CGM Group will recover bunker costs through its bunker related surcharges, which will be applied to all cargo on all worldwide trades,” CMA CGM said.

Maersk is considered the largest ocean freight carrier, followed by MSC and CMA CGM, which together represent 53.6% of the market.

CMA said the surcharge will be $55 per 20-foot container or TEU for dry bunker and $85 for reefer fuel. Implementation will begin either on June 1 or July 1 depending on trade route.

Rodolphe Saadé, chairman and CEO of CMA CGM Group, said: “The shipping industry is experiencing sustained growth, but was hit in the first quarter by the sharp increase in bunker prices.”

Saadé, commenting on the surcharge and CMA CGM’s release of its first quarter financial statement, said, “In this environment, CMA CGM succeeded in recording a strong increase both in volumes transported and in revenue, while maintaining a positive core EBIT margin, thus demonstrating once again the relevance of our strategy.”

Noting that volume should remain high throughout the year, he added, “In order to deal with the increase in bunker prices, which continue to rise into the second quarter, we are implementing an exceptional surcharge. The CMA CGM Group will continue its development strategy for its customers both in maritime transportation and in building end-to-end solutions, while pursuing its digital transformation and strengthening the expertise of its teams.”

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CMA CGM said fuel oil prices rose 19.4% in the quarter. In the first quarter, transported volume increase 15 percent to 4.95 million TEU from the year-ago period, which it credited to its participation in the Ocean Alliance, the strong momentum of the African-U.S and North America-South America lines, as well the integration of Mercosul.

The company’s revenue in the first quarter increased 17.1% to $5.41 billion compared to the same quarter last year. Consolidated net income was a loss of $77 million compared to income of $86 million in the first quarter of 2017, resulting primarily from the unfavorable euro-dollar exchange rate variation.

Earlier this month, A.P. Moller – Maersk saw its underlying loss in the first quarter widen to $239 million from $139 million a year earlier, as overcapacity and higher fuel costs combined with trade tensions, and indicated it was set to cut some services. Maersk said it will impose a $60 per TEU surcharge on all cargo globally. Maersk Line said, “The increase in bunker price in 2018 has been significantly higher than what had been expected and has now reached a level of $440 per ton in Europe, the highest since 2014.”

The price of Brent crude oil futures closed at $76.44 a barrel on Friday compared to about $50 a barrel a year ago. Meanwhile, the World Container Index assessed by Drewry, a composite of container freight rates on eight major routes to and from the U.S., Europe and Asia, was down 1.1% to $1,351.94 per 40-foot container for the week ended May 24 and was down 6.6% from the same period of 2017.