Maersk negotiates higher freight rates on back of bunker fuel price surge

    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.

Drewry astonished by Hyundai's bizarre Asia-Europe market moves

    Korea's Hyundai Merchant Marine's (HMM) expansion plan in ordering fourteen 22,000-TEU ships, is incompatible with market stability, declares London's Drewry Maritime Research.

    Also astonishing to the research house is HMM's plan to deploy the Asia Europe Express (AEX) using old and comparatively tiny panamaxes of 4,700 TEU in April.

    "The AEX ships would be the smallest deployed on the route that is usually reserved for ultra large container vessels with faster transit times to Europe," said Drewry

    Alphaliner says calls at Rotterdam, Hamburg and Felixstowe being used as the carrot to shippers.

    "The two developments appear to be connected. HMM has two years left to run on a slot-charter agreement signed in 2016 with 2M carriers Maersk Line and MSC and presumably sees the new ships either as a bargaining chip to continue that partnership as it will have more to bring to the table, or to leverage full membership of another carrier group, or in the worst case scenario to have sufficient means to operate independently, building on the custom generated by the AEX service," says Drewry.

Dubai media back DP World after Djibouti ruler seizes terminal

    The Djibouti government's move to "illegally seize" the Doraleh Container Terminal operated by DP World will badly damage the country's reputation among foreign investors, says and commentary in Dubai's Khaleej Times.

    At the time of the seizure last week, the office of national President Ismail Omar Guelleh stated: "The Republic of Djibouti has decided to proceed with the unilateral termination with immediate effect of the concession contract awarded to DP World.

    After losing an arbitration that exonerated the Dubai port operator of wrongdoing, Djibouti unsuccessfully sued state-owned DP World over allegations that the port operator bribed an ex-port authority boss in exchange for favourable terms for the concession.

    Djibouti now says its seizure serves the "sovereignty of the state and the economic independence of the country". The terminal will now be run by a state-owned management company, it said.

    Dubai-based DP World and the Djibouti government had signed a deal to design, build and operate the terminal under 30-year concession deal, said the commentary.

    "But the East African country's government resorted to a campaign to force the global ports operator to renegotiate the terms of concession," it said.

    According to DP World, the Djibouti government has been trying to use the law against concession contracts since December 2017 so it issued a final demand that the contract be renegotiated by February 21.

    "When that didn't happen the contract was terminated by presidential decree, and expropriation of all of the assets of Doraleh Container Terminal took place," said the Khaleej Times.

    Said Dubai's Gulf News: "DP World has contributed hundreds of millions of dollars of direct and indirect economic benefits to Djibouti, enhancing the African country's attractiveness as an investment destination in East Africa.

    The Gulf News commentary continued: "DP World, one of the world's biggest ports operators, said its terminal in Djibouti is the "largest employer and biggest source of revenue in the country".

(Source:HKSG-GROUP)

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