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Fuel price rises are unavoidable, says Hapag-Lloyd chief

Hapag-Lloyd says it is having success implementing its bunker adjustment mechanism for contract customers. But short- to medium-term rates may prove more difficult

Carrier customers will need to contribute to the increased cost of fuel regardless of what the eventual spread is between high- and low-sulphur fuels

CONTAINER line customers are facing up to having to pay more for ocean freight as fuel costs increase, according to Hapag-Lloyd chief executive Rolf Habben Jansen.

Mr Habben Jansen said adoption of new bunker factors introduced at the beginning of the year had been good.

“A very high percentage of all our contracts now includes a bunker clause, in most cases ours, but in some cases we have used customer clauses that tend to be very similar to ours,” Mr Habben Jansen told Lloyd’s List on the sidelines of the Journal of Commerce’s TPM conference in Long Beach,

“What is good is that you see an increasing recognition from customers that fuel is a variable cost that is outside our control,’’ he added.

“As a consequence of that, we need to agree something around it. For the contracts, I don’t think it is going to be a big issue, because everyone understands that it is something that needs to be addressed.”

Additional work was still needed to bring bunker charges to the short- and mid-term rates, however.

“The key thing will be the three-month rates,” Mr Habben Jansen said. “People need to understand that in the rate they are offered, a certain amount of it is for fuel. If they renew three months later, that rate will go up or down with the fuel price. And when we start using low-sulphur fuel, those rates will go up.”

How much those rates rise remains open to speculation.

“We have said we assume the spread between low-sulphur fuel and traditional bunkers will be around $250 a tonne, which will add just over $1bn to our fuel bill,” he said. “But I’ve heard people say it will be $350 and others say only $75.”

But customers would need to contribute, whatever the spread turned out to be.

“The reality is that costs will go up because we have to use different types of fuel, and you cannot negotiate that fact away,” Mr Habben Jansen said. “That will need to be reflected in the rates as we move into the fourth quarter and 2020.’’

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