US shippers confront fuel charge controversy

🌎 Tariffs, rather than war, impacting markets

Figure of the week

94% The rise in the price of jet fuel since the start of the Iran war. Jet fuel price rises have far outstripped those of crude oil since the start of the conflict. This is because the Middle East is the primary supplier for refined aviation kerosene and fewer alternative sources of supply exist than for other refined petroleum products.

Quote of the week

“We’re in a tough spot, ladies and gentlemen, and I can’t identify a lot of good options. I think that you could see a tax for any ship going through (the Strait of Hormuz) — something completely unsustainable in the international market.” Former US Defense Secretary James Mattis warned that the economic pain caused by disruptions at the Strait of Hormuz could continue to grow in the absence of strategic options for the US to reopen the route by force.

US shippers confront fuel charge controversy

The FMC has turned down ocean carrier requests to waive a 30-day notice period on Middle East-related surcharges. The move comes amid growing acrimony between shippers and carriers outside the US over fuel surcharges . In the US, CMA CGM, Hapag-Lloyd, Maersk and Zim had filed 30-day notices to announce fuel-related surcharges. However, these carriers had also requested an exemption from the US mandatory 30-day waiting period before such fees could be imposed. CMA CGM, Hapag-Lloyd and Maersk’s surcharges apply only to US–Middle East services, while Zim’s request applies to all US trades. In any case, US shippers are likely to start to face surcharges in early April as carriers implement their quarterly bunker adjustment factor (BAF) reviews at the end of this month. In Europe, shippers have accused ocean carriers of using fuel surcharges to profiteer from the war in the Middle East. Carriers have also faced accusations of double billing, by implementing both emergency and quarterly charges. James Hookham, director of the Global Shippers Forum, said: “Shipping lines always seem to manage to turn a crisis into a cash grab”. “This apparent double dipping brings the whole sordid practice of surcharging into further disrepute,” he added. Carriers have defended surcharges, which range from $30 to $300, saying that the war in Iran has created such a huge energy shock that they need to use mechanisms beyond the existing BAFs. In that case, said Antonis Rigalos, managing partner of shipper network shiftX, such surcharges should only be acceptable up to March 26. After that, the increased cost of bunker fuel should be covered by quarterly BAF charges, he said. Bunker fuel accounts for around 15% to 30% of carriers’ operating costs. “An EBAF plus BAF review would create a double charging of customers,” Rigalos said. “While we understand the situation of carriers and that increased bunker costs have a big impact that needs to be recovered, it needs to be carried out in a fair way and not by double charging BCOs and clients.” So far US shippers have been largely shielded from the early fuel surcharges hitting their counterparts in Europe. But this is likely to change next week – especially if the apparent US-Iran negotiations fail to bear fruit .

Middle East turbulence buffets air freight shippers

Trans-Pacific air freight shippers are seeing increased volatility in rates as the ripples from the Middle East war spread beyond the region . Airspace closures around Iran are causing a capacity crunch not only in the Middle East, but also beyond. Disruption to ocean freight services, while less than initially feared, is also feeding into air cargo demand, increasing backlogs and pushing up rates.

Fuel surcharges are rising as oil prices swing wildly depending on messaging from the White House. The price of jet fuel has almost doubled since the US and Israel attacked Iran (see “figure of the week”).

As a a result, analysts have warned shippers to be ready for further increases and continued volatility in the coming weeks. Rates are currently changing on a daily basis, especially from HKG, and capacity is tightening. Capacity is also tight on Europe to US services. Rates on this lane are expected to stay high until the end of March, and shippers should budget for higher rates on this trade until then. Trans-Pacific rates are likely to depend significantly on events in the Middle East given the close relationship between the conflict and jet fuel prices. Jet fuel typically accounts for between 20% and 40% of an airline’s operating costs .

Tariffs, rather than war, impacting markets

The impact of the war in the Middle East on shipping capacity has been weaker than expected so far. Yet even so, trans-Pacific Shanghai to Los Angeles services recorded considerable week-on-week gains . The Shanghai to Los Angeles leg saw a 4% week-on-week gain, according to Drewry WCI figures, while Shanghai to New York rose 7%. However, analysts put the increases largely down to a temporary post-Lunar New Year surge, with many expecting rates to soon settle. One of the main reasons for slack demand is continued uncertainty over US tariffs. President Donald Trump has vowed to maintain his tariff policy through other instruments such as Section 301 and Section 122 of the Trade Act of 1974 after the White House’s Supreme Court setback. But lawyers have already begun to challenge tariffs imposed under Section 122, saying that Trump has “once again exercised tariff authority that he does not have.” While legal experts are skeptical that this could lead to an eventual judicial overturn of the tariffs, it may deter Trump from increasing tariffs further. Trump had initially threatened to impose tariffs of 15% rather than 10%. Meanwhile, the White House has increased pressure on the European Parliament to ratify the trade deal previously agreed between the EU and US. The administration has threatened to remove “preferential” terms for the purchase of US LNG for EU countries. Overall, while demand may remain slack in coming weeks, shippers can expect rates to start rising as contract negotiations near completion throughout April. Carriers are likely to intensify their blank sailing policies to support rates and, as explained in our earlier story, fuel surcharges are likely to push up shipping costs .

🤔 Did you know ?

New driver regulations targeting migrant truckers and rebounding demand are contributing to rising trucking rates. National dry van spot rates have hit their strongest level since 2022 as capacity thins, according to the SONAR National Truckload Index. The 7-day moving average of booked rates including fuel stands at $2.89 per mile. Rebounding activity in the West Coast following the Chinese New Year is adding to demand.

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