Increase in energy transition surcharges
The shipping companies have announced big increases in the European Union’s Energy Transition Surcharge (ETS) which is supposed to cover the costs generated by the EU Emissions Trading System (EU ETS) and the FuelEU Maritime regulations. The companies justified the increases by the heavier obligations placed on them by the EU ETS. From 2026 on, they have to include all their emissions in the scheme, compared to 75% in 2025 and 40% in 2024. The field of application of the system has also been widened to include methane and nitrogen protoxide, as well as CO². The companies also point out that they have incurred extra costs in meeting the requirements of the FuelEU regulation because of changing biofuel prices. The result is an average surcharge of USD170 for the transportation of a 40’ dry container from Asia to North Europe during the first quarter and USD250 for a 40’ reefer.
The surcharges are reviewed by the companies on a quarterly basis in line with changes in the price for a tonne of carbon. It has yet to be decided definitively if they should be included in freight rates and this has led to some deviations. A simplification would be useful since no one is able to understand the excessively complicated calculations involved and this has raised doubts about the credibility of the sums being billed, especially when they are included in the freight rates offered to customers. For the great majority of shippers, the increase in the surcharge is currently balanced out by the fall in freight rates but the market is nevertheless calling for greater clarity.
Suez Canal still little used
The number of ship transits through the Suez Canal is still 60% down on its 2023 level and, for container ship transits alone, 86% down. The shipping companies are still showing great caution. Maersk announced that its MECL service between the Middle East and India and the US East Coast would be transiting through the canal from now on. It will, however, be mainly using small Maersk Ltd ships under US flag, which will thus benefit from hoc military protection and a dissuasive right of response in the event that they are attacked. On 3 February, the two Gemini partners, Maersk and Hapag Lloyd, announced that their IMX service between India and the Middle East would also be returning to the Suez Canal. They specified, however, that all transits would « benefit from naval assistance ». This return to the Suez Canal could be extended in future to the SE1 and SE3 services between Asia and the Mediterranean, even though the situation in the region remains fragile. On the other hand, CMA CGM, which recently took the initiative of sending a 20,000+ TEU vessel through the Red Sea for the first time in two years, is holding off on a more general return to the canal. It announced that its mainline Asia-Europe services, the FAL1 and the FAL3, would, for the time being, continue to go round the Cape of Good Hope.
Although it had been expected that there could be a wider return to the canal around the time of the Chinese New Year, it now seems that this is now unlikely to happen before April at the earliest. The increase in tension between the United States and Iran at the end of January has made this eventuality even less likely, moreover, given that the Houthis have said that they are ready to target merchant vessels again in the event of any American attack. This threat, which has not been taken lightly, is not necessarily bad news for the shipping companies, since the “forced” extension of their use of the route round the Cape of Good Hope is continuing to reduce the impact of the overcapacity of their fleets and thus helping to prevent freight rates from collapsing (...)
Most shipping companies clearly tried to maintain an upward rate trend between the start of the annual contract negotiating period and the Chinese New Year. The strategy worked quite well for several weeks but the temptation to bring surplus capacity into play seems to have dealt it a fatal blow.
All the main indicators registered a sharp drop in spot market rates from mid-January on, which ranged from 7% to 12%, depending on the source. Upply’s data base, which uses a mix of spot and contract prices, has been showing a relatively flat curve since the month of November.