The spread of political disruption in North Africa and the Middle East, which has involved Algeria, Tunisia, Egypt and most recently Libya, is making bunker fuel prices volatile and putting financial pressure on ocean forwarders serving the automotive industry.
Following comments made last week by K-Line that the impact of the upheaval on oil price rises was a cause for concern, this week UECC said that while supply is currently not being affected, the company is seeing “enormous negative financial impact” on its operational costs because of bunker prices.
The impact on providers was put strongly today at the Automotive Logistics Europe conference in Bonn, Germany when ECG president and Grimaldi commercial and logistics director, Costantino Baldissara, warned that the rise was putting finished vehicle providers at real risk and that if serious compromises to businesses were to be avoided carmakers needed to discuss with their suppliers an extra diesel bunker cost revision.
Bunker fuel has been flucutating at high levels for some time, with oil often over $100 a barrel, and further fuel surcharge increases are possible unless unrest in the region is resolved quickly.
“Since the ousting of Tunisia's president in mid-January we have seen great volatility in the bunker price in our ports in North-west Europe. This was further intensified with the Egyptian revolution in early February,” added Norikazu Saito, spokesman for Car Sales at UECC. “This past week has seen the greatest degree of volatility for some time, owing primarily to civil unrest in cities in OPEC-member Libya.”
However, he went on to say that the company has yet to encounter difficulties in securing product at its main bunker ports of Zeebrugge, Bremerhaven and St Petersburg but is looking carefully at the developing market situation.
Asked whether the volatility in pricing would affect bunker surcharges for its customers, UECC’s head of Car Sales Bjorn Svenningsen would only say that the rising fuel price is being regulated and compensated for with the Bunker Adjustment Factor (BAF) the company has with its customers.
Shipping lines have set their own independent BAF rates since 2008 when the European Commission banned the previous arrangement in which carrier conferences were held to determine the charges.
As Kai Krass, COO at Wallenius Wilhilmsen Logistics, made clear at this morning's first session at the Automotive Logistics Europe conference, if the crisis continues in the Middle East, bunker prices could rise to as much as $800 per tonne in two weeks, which would mean a very costly situation for both WWL and its customers.
The figure does not seem far-fetched, as NYK Europe's Phil O'Reilly, who was also speaking at today's conference made clear, the price per tonne has increased to $631 this week, a climb of 18% in a fortnight.
However, while Krass admitted that the last couple of weeks have seen significant increases, he also recognised that it had held a high level more recently. "If it continues, then you have to look into it, but it would be premature to say at this stage," he cautioned.
Krass' message at the session on 'responsible logistics' was that bunker prices are going to go up anyway and it was time for both shipping companies and their customers to work on ways of lowering consumption overall.
But in the short term, swings at the high end are likely. Another leading car carrier told Automotive Logistics News this week that it had experienced difficulties in both the availability of bunkers in North Africa and across the Middle East, as well as very high swings in bunker prices. “In more recent weeks, we have seen bunker prices changing by +/- $40/day, per tonne,” he said, adding that volatility in prices is in many cases passed on to its carmaker customers as part of the BAF contracts to ensure rapid prices rises were shared.
The company has been taking less bunkers in the Middle East recently, compared to the past 12 months, and has seen increased prices in the Middle East compared to Singapore or the US East Coast, according to the source.
Meanwhile, instability at Libyan ports means many operators are still not able to make calls and services remain suspended until further notice. Congestion is also continuing at other ports in the region as a consequence of the trouble.
