New and possible sea freight surcharges for 2024

Surcharges like BAF and CAF have become a standard feature of freight rate calculations, but there will always be scepticism of temporary surcharges and new ancillaries like the ‘container shifting’ charge announced by Maersk to cover re-stows on its ships.

While the container shipping lines may seek to recover revenues with general rate increases (GRIs), with huge GRIs announced from Asia for mid-December and January, they also see temporary surcharges as a mean of compensating, at least partially, for current low freight rates.

To support their rate recovery efforts the carriers are blanking around 40% of their advertised sailings from China and whether or not their capacity reduction works there is a strong likelihood that we will see surcharges become a much larger component in the costing of sea freight services in 2024, with combined surcharges possibly accounting for 20% of the overall freight rate.

On the spot market, in particular, surcharges are added to the basic freight rate and the lines will do all they can to ensure that these surcharges are applied

EU Emissions Trading System
The EU-ETS emissions surcharge comes into operation on the 1st January, with the average TEU surcharge for the Asia to North Europe trade route at €25, Asia to Mediterranean €16 and the transatlantic €33.

Carriers have indicated that surcharge amounts will be reviewed on a monthly or quarterly basis as the volatile price of EUAs adds another layer of complexity to the surcharge, making it hard for the lines to predict how much they will cost.

There is still discussion on whether the surcharge should apply to the UK and Maersk have stated that only bookings where the Load Port and/or Discharge Port of the ocean journey is located in the EU/EEA scope will be charged the emissions surcharge.

However, for all bookings from China Maersk will add the EU ETS emissions surcharge to the base freight rate instead of an additional surcharge, because the Shanghai Shipping Exchange regulation views surcharges as temporary (for exports only).

So if regulations are that the EU ETS must be included in the freight rate from China, it is likely that other carriers will follow Maersk’s lead.

War Risk
Surcharges for war risks are usually justified by the fact that insurers typically impose surcharges on carriers, but this is not always the case and there is an opportunity for the lines to take additional profit.

The spillover from the Israel/Gaza conflict continues with an NYK car carrier hijacked and container ships attacked.

There is currently a war risk premium for vessels going to Israel and if further incidents occur we may see the war risk premium expanded throughout the Red Sea and Gulf of Aden.

The Strait of Ormuz is a particularly sensitive zone and the nearby Gulf of Aden and Suez Canal could also be threatened by any escalation, although there are hopes that the Americans will be successful in their efforts to escort merchant shipping.

A blockage of the Suez Canal would force more carriers to divert vessels around the Cape of Good Hope, which is 7,000 nautical miles longer, adds 10 days to the transit time and requires much more fuel.

If this option became the norm, capacity would be tied up for an additional 10 days and more ships would have to be brought into service.

This is a fast moving, complex situation and we are monitoring it closely, so that we can implement contingency plans if necessary and keep you updated with the most important developments.

Additional fuel surcharges
There is currently a high risk of speculation on refined product prices and if there is a major escalation of the Israeli-Palestinian conflict, they are likely to become even higher. 

This means that there is a risk that a general Emergency BAF surcharge could be introduced to take account of these potential cost increases.

The use of alternative fuels, which are more environmentally friendly but more expensive, could also lead to specific new surcharges in additional to the existing Low Sulphur Fuel surcharge.

Aden surcharge
With the USA seeking a coalition to protect shipping, this surcharge could be extended to cover the extra cost of securing merchant shipping convoys crossing the Gulf of Aden.

The increased risk involved in transiting the gulf could result in a significant increase in this surcharge, which was originally created to cover the cost of anti-piracy measures.

Suez Canal surcharge
The Suez Canal is increasing fees by 15% for Asia-Europe traffic from the 15th January 2024.

If the conflict in Gaza escalates, the container shipping lines could be asked to contribute to the cost of securing the Suez Canal militarily, which would be in addition to war risk and and Aden surcharges.

Panama
Transit and draught restrictions were imposed by the Panama Canal Authority (ACP) in response to persistent low water levels from the drought that has hampered operations since May.

Container shipping lines have reacted to the restrictions by adding canal transit surcharges ranging from $300 per teu to $500 and restrictions may stay in place for years.

We will, as always, pressure our carrier partners to fully justify the imposition or increase of any surcharge or ancillary charges.

EMAIL Colin Redman, if you would like to learn more, or have concerns about any of the issues raised here.