Bunker Prices Rise Sharply, Putting Shipping Companies Under Cost Pressure
The international shipping industry is once again facing sharply rising fuel costs. The trigger is the tense security situation around the Strait of Hormuz. Since the end of February, the situation in the Persian Gulf has deteriorated significantly. The result is massive price movements in the market for ship fuels.
Current market data shows a significant price jump. High Sulphur Fuel Oil, or HSFO, is currently quoted at around 886 US dollars per ton. This corresponds to an increase of around 36.5 percent compared to the level before the crisis began.
The low-sulfur fuel VLSFO, which has become standard for most ships since the international environmental regulations of the IMO, is also becoming significantly more expensive. The current price is approximately 929 US dollars per ton, representing an increase of around 26.4 percent.
At the same time, the so-called bunker spread has changed. This describes the price difference between sulfur-containing and low-sulfur fuel. While the spread was previously significantly larger, it has now shrunk considerably and stands at only around 43 US dollars per ton.
The development is directly related to the situation surrounding the Strait of Hormuz. As the passage has become unsafe for parts of the international shipping industry, many shipping companies are diverting to alternative routes. The route around the Cape of Good Hope is currently being used particularly often.
This diversion extends a typical container journey between Asia and Europe by about ten to fourteen days. More sea days mean significantly higher fuel consumption. At the same time, the demand for bunker fuel is rising in major ports outside the crisis region.
As a result, several important bunker locations are reporting increased demand. In Rotterdam, Singapore, and Tanjung Pelepas, market participants are reporting longer wait times for fuel deliveries. At the same time, there are partial restrictions on refineries and export facilities in the Middle East.
For shipping companies, this means rising operating costs. Fuel is one of the largest cost blocks in maritime transport. Depending on the type of ship and route, the bunker share accounts for between thirty and fifty percent of operational costs.
Many carriers are already responding with surcharges. New bookings often include so-called Bunker Adjustment Factors or short-term fuel surcharges. Shippers are particularly feeling this development in spot rates.
Global freight rates could also continue to rise in the coming weeks. Market observers expect additional price dynamics if the situation in the Persian Gulf remains tense for an extended period.