Drewry: Clear Evidence Box Carriers Are Passing-On Bunker Savings

BAFs have dropped from 47 percent of overall freight rates to 27 percent

Box carriers are passing on bunker savings to shippers, according to Drewry's latest Container Insight.

Freight rates net of Bunker Adjustment Factor (BAF) surcharges have been rising since October 2014, said Drewry, but overall rates have been kept in check as BAFs have shrunk over the same period.

"What did change was the ratio of BAF as part of the all-in rate, which reduced from 47% in November to 27% in February."

The fall in BAF levels is clear evidence that shippers are passing on savings, said Drewry, although there has been a time lag between the fall in bunker prices and the fall in BAF adjustments.

"There is often a time-lag before the average BAF catches up with the drop in IFO, which is most likely a function of the responsiveness of carrier BAF calculators than anything sinister."

Maersk Line has said it assumes that between 70 percent and 80 percent of bunker savings are being passed on to customers.

The reduction in BAF surcharges has exacerbated a dramatic slide in freight rates, which have fallen for eight straight weeks from around $2,400 per forty-foot equivalent unit (FFE) for Shanghai to Rotterdam voyages in late January to $1,180 per FFE last week.

"Carriers have been passing on the benefits of lower fuel costs to shippers," concluded Drewry.

"This was acceptable when all-in rates continued to rise, but they might not feel so generous now that rates are on the floor."

In December, consultants Container Transport International (CTI) said short term gains from lower bunker prices had been noted by shipping lines towards the end of last year but they were not likely to persist into 2015.