Register with us today

and in less than 60 seconds continue your access to:Latest news headlinesAnalytical topics and featuresCommodities videos, podcast & blogsSample market prices & dataSpecial reportsSubscriber notes & daily commodity email alerts

Already have an account?

Log in to register

Forgot Password

Please Note: Platts Market Center subscribers can only reset passwords via the Platts Market Center

Enter your Email ID below and we will send you an email with your password.

  • Email Address* Please enter email address.

If you are a premium subscriber, we are unable to send you your password for security reasons. Please contact the Client Services team.

If you are a Platts Market Center subscriber, to reset your password go to the Platts Market Center to reset your password.

In this list

Shipping Quarterly: Container market braces for turbulent 2019 amid uncertain bunker fuel costs


The battery of the future: Seeking higher energy density


Platts Dirty Tankerwire

Oil | Refined Products | Fuel Oil | Shipping | Dry Freight | Marine Fuels | Tankers

Mediterranean Bunker Fuel Conference, 8th Annual

Shipping Quarterly: Container market braces for turbulent 2019 amid uncertain bunker fuel costs

London — The container market is to face strong headwinds in 2019 as volatility in bunker prices along with growing uncertainty shrouding the impact of International Maritime Organization's 2020 global sulfur cap threatens to make negotiating bunker recovery mechanisms and overall freight increasingly challenging.

Not registered?

Receive daily email alerts, subscriber notes & personalize your experience.

Register Now


The rapid changes in oil prices in the final quarter of 2018 have once again exposed the nagging issue of factoring bunker expenses into ocean freight.

The average monthly Dated Brent price fell by $16.67 to $64.48/b in November 2018, a whopping 20.5% drop from October's $81.15/bbl.

The final month of December brought no peace to the many markets anxiously watching the changes in oil prices. Factors like OPEC production cuts, Iran sanctions waivers and growing US crude output kept crude oil and subsequently bunker prices volatile.

The rapid changes in bunker prices in Q4 made it challenging for carriers, shippers and logistics companies to negotiate annual freight contracts for 2019. Bunker cost recovery mechanisms often use rolling quarterly averages of bunker prices in key ports to determine the baselines of dollar per container bunker charges, which go on top of the general freight.

When prices are this volatile, agreeing both bunker charges and general freight elements in container contracts becomes an exercise in frustration for counterparties, sources said.

The Platts Bunker Charge 1 index, which reflects dollar per forty-foot container bunker costs on the North Asia to North Continent route fell by $59.22 from $280.41/FEU on December 3 to $256.36/FEU on December 17.

According to shipping sources, this volatility served as a preview of what is expected to be a very turbulent year in 2019, in the rundown to IMO 2020 and the many worries that ride with it.


The IMO 2020 rule change, which will see sulfur content in maritime fuel drop from 3.5% to 0.5%, is bringing a number of wild cards to the container market. Carriers will have to consider multiple factors in their Bunker Adjustment Factor (BAF) mechanisms, which include prices for 0.5% fuel oil blends, adoption of scrubbers, the spread between 3.5% fuel and low-sulfur gasoil and many others.

Already, a variety of Bunker Adjustment Factor (BAF) mechanisms for 2019 has been pushed forward by carriers under different names with multiple additional surcharges and diverse approaches towards linking bunker charges to fuel or crude oil prices and working out the overall freight.

Bunkering Portfolio Solutions

Platts Bunker Portfolio offers a unique mix of products, whatever your position in the bunker fuel supply chain. The combination of business intelligence you use is crucial: from breaking news to detailed market analysis, price assessments to in-depth credit reports.

More Information

The ensuing confusion makes negotiating bunker charge elements in freight for 2019 increasingly difficult and chaotic with many sources questioning the BAF approach as a whole.

"It has become so complicated that even carriers themselves struggle to explain their bunker surcharges to us," said a source with a large retail company. "The periodic adjustments [of bunker charges] will wreak havoc on our costing, budgeting and auditing next year." The general lack of transparency in BAF mechanisms proposed by carriers may result in shippers pushing down on the freight element in both spot and annual contracts next year to compensate for what may be perceived as unfairly high bunker surcharges, sources said.


The freight part of the equation will also keep being influenced by geopolitical processes, like the US-China trade war and Brexit, both of which may culminate in the spring of 2019.

The trade tensions between the US and China provided a strong support for container freight in 2018. Each time a new tranche of US tariffs on Chinese goods was announced, shippers rushed to get their cargoes across the Pacific to beat the deadline and avoid additional charges. This resulted in significant spikes of demand and much stronger freight than expected for Q4.

According to S&P Global Platts data, the monthly average of the PCR1 North Asia to West Coast North America for November 2018 was $3,461.36/FEU, nearly double the average of November 2017 of $1,793.18/FEU.

With the effective date for the new increase of US tariffs on Chinese goods to 25% from the current 10% pushed back to March 2, 2019 from the initially planned January 1, industry participants expect another hike in demand in the first quarter of next year.

Similarly, Brexit, which is to take place on March 29 next year could bring a short-term spike in volumes on the North Asia to UK trade lane as British retailers are expected to stock up before the deadline. The PCR11 North Asia to UK index averaged at $1,289.77/FEU in November 2018.

--Alex Younevitch,

--Edited by Jonathan Loades-Carter,