Emergency Bunker Surcharges: What Shippers Need to Know About Rising Fuel Costs

Introduction

The global shipping industry is facing significant challenges due to the rising cost of crude oil, which is causing disruptions throughout the supply chain. From trucking strikes in Brazil to reduced profit targets for airlines, the impacts are being felt across all transportation modes. However, the ocean freight sector is particularly affected, with bunker fuel prices spiking 19.4% since April. To recoup these increased costs, carriers are now implementing emergency bunker surcharges on certain contracts.

As your trusted Digital Logistics Platform, we at FreightAmigo want to provide clarity on this complex and evolving situation. In this article, we'll break down what these surcharges mean for shippers and how our digital solutions can help you navigate these market changes.

Understanding Emergency Bunker Surcharges

Let's start by explaining what these surcharges are and why they're being implemented:

What are Emergency Bunker Surcharges?

Emergency Bunker Surcharges (EBS) are additional fees that ocean carriers are adding to their standard rates to offset the unexpected increase in fuel costs. These surcharges are being applied to worldwide trade lanes and vary depending on the carrier and specific route.

Why are they being implemented?

The primary reasons for these surcharges include:

• Rising crude oil prices: Vessel fuel (known as bunker) is tied to the price of oil, which has been increasing since early 2017.
• OPEC supply cuts: The Organization of Petroleum Exporting Countries (OPEC) has been reducing oil supply, contributing to price increases.
• Geopolitical factors: U.S. sanctions against Iran are expected to further impact oil prices.
• Unexpected cost surge: Carriers were not prepared for the significant increase in bunker costs during the first quarter of 2018.

How much are the surcharges?

The surcharges vary by carrier and trade lane, ranging from $20 to $90 per TEU (Twenty-foot Equivalent Unit). Each carrier is using different terminology for these charges, such as:

• APL: Emergency Bunker Recovery (EBR)
• Hamburg Sud: Emergency Fuel Adjustment Factor (EFAF)
• Hapag Lloyd: Operations Cost Recovery (OCR)
• Maersk: Emergency Bunker Surcharge (EBS)
• OOCL: Peak Season Surcharge (PSS)

When will these charges be in effect?

The implementation dates vary by trade lane, with surcharges being introduced between June 1 and July 15. The duration of these surcharges is uncertain, as carriers will determine how long to keep them in place based on market conditions.

Impact on Shippers and Supply Chains

These emergency bunker surcharges can have significant implications for shippers and their supply chains:

1. Increased Transportation Costs

The most immediate impact is an increase in overall transportation costs. Shippers will need to factor these additional charges into their budgets and pricing strategies.

2. Potential Supply Chain Disruptions

If shippers are unable to absorb or pass on these increased costs, it could lead to changes in shipping patterns or volumes, potentially causing disruptions in supply chains.

3. Contract Renegotiations

Some shippers may need to renegotiate their contracts with carriers or consider alternative transportation options to mitigate the impact of these surcharges.

4. Cash Flow Challenges

For businesses operating on tight margins, these unexpected surcharges could create cash flow challenges, particularly if they cannot immediately pass on the costs to their customers.

5. Need for Enhanced Visibility and Planning

The volatile nature of fuel prices and surcharges highlights the importance of having real-time visibility into shipping costs and the ability to quickly adapt logistics strategies.

How FreightAmigo Can Help Navigate These Changes

As a full-service, one-stop Digital Logistics Platform, FreightAmigo offers several solutions to help shippers adapt to these market changes:

1. Real-Time Rate Comparisons

Our platform allows you to compare door-to-door freight quotes for various transportation modes, including ocean freight. This feature enables you to quickly identify the most cost-effective options, taking into account the new surcharges.

2. Comprehensive Tracking

With our ability to track shipment status anytime, anywhere (connecting to more than 1000+ reputable airlines and shipping lines), you can maintain visibility over your cargo and make informed decisions about routing and transportation modes.

3. Automated Documentation

Our automated shipment document feature helps streamline your operations, reducing administrative costs and allowing you to focus on strategic decisions in light of these new surcharges.

4. Integrated Insurance and Finance Solutions

FreightAmigo's platform offers integrated cargo insurance and trade finance options. These features can help mitigate risks and manage cash flow challenges that may arise from increased shipping costs.

5. 24/7 Expert Support

Our round-the-clock logistics expert support ensures that you have access to professional advice and assistance in navigating these complex market changes.

6. Data-Driven Insights

By leveraging artificial intelligence and big data, FreightAmigo provides valuable insights that can help you optimize your logistics strategies in response to market fluctuations.

Strategies for Managing Emergency Bunker Surcharges

While these surcharges present challenges, there are several strategies that shippers can employ to manage their impact:

1. Diversify Transportation Options

Consider alternative transportation modes or routes that may be less affected by the surcharges. FreightAmigo's platform allows you to easily compare options across air, sea, rail, and road freight.

2. Optimize Container Utilization

Maximizing container space efficiency can help reduce the per-unit impact of the surcharges. Our Digital Logistics Platform can assist in planning optimal load configurations.

3. Negotiate Long-Term Contracts

For high-volume shippers, negotiating long-term contracts with carriers may provide more stable pricing and protection against sudden surcharges.

4. Implement Fuel Hedging Strategies

Consider fuel hedging strategies to protect against future price volatility. While this requires careful planning and expertise, it can provide more predictable costs over time.

5. Enhance Supply Chain Visibility

Utilize FreightAmigo's tracking and analytics capabilities to gain better visibility into your supply chain. This can help identify areas for optimization and cost reduction.

6. Explore Consolidation Opportunities

Look for opportunities to consolidate shipments with other shippers to potentially reduce the impact of surcharges on smaller loads.

7. Review and Adjust Inventory Strategies

Consider adjusting inventory strategies to balance the increased transportation costs against holding costs. This may involve less frequent but larger shipments in some cases.

The Role of Digital Solutions in Adapting to Market Changes

The implementation of emergency bunker surcharges underscores the importance of digital solutions in modern logistics management. FreightAmigo's Digital Logistics Platform offers several advantages in this context:

1. Agility and Flexibility

Our digital platform allows for quick adjustments to shipping strategies in response to market changes. You can easily compare different options and make informed decisions in real-time.

2. Data-Driven Decision Making

By leveraging big data and AI, FreightAmigo provides valuable insights that can help you optimize your logistics operations and mitigate the impact of surcharges.

3. Streamlined Operations

Our automated documentation and integrated services help reduce administrative overhead, allowing you to focus on strategic decisions rather than paperwork.

4. Enhanced Collaboration

FreightAmigo's platform facilitates better communication and collaboration between shippers, carriers, and other stakeholders, enabling more effective responses to market changes.

5. Continuous Improvement

As a digital platform, FreightAmigo is continuously evolving to meet the changing needs of the industry. We're committed to developing new features and capabilities to help our clients navigate challenges like these surcharges.

Conclusion

The implementation of emergency bunker surcharges represents a significant challenge for the shipping industry, but it also highlights the importance of adaptability and digital innovation in logistics management. At FreightAmigo, we're committed to providing the Digital Logistics Solutions you need to navigate these changes effectively.

Our comprehensive platform combines artificial intelligence, big data, FreighTech, FinTech, InsurTech, and GreenTech to accelerate logistics, information, and cash flow. By leveraging these technologies, we can help ensure a hassle-free and enjoyable logistics experience, even in the face of market challenges like these surcharges.

As we continue to expand our footprint and ecosystem globally, we're creating new paths for businesses and individuals to grow and ship. Whether you're sending documents, parcels, or bulk goods for international relocation, FreightAmigo is here to support you with powerful functions and expert guidance.

Don't let emergency bunker surcharges disrupt your supply chain. Contact FreightAmigo today to learn how our Digital Logistics Platform can help you adapt to these changes and optimize your shipping strategies for the future.