The huge spike in bunker fuel prices over the last two weeks driven by oil market volatility after Russia’s invasion of Ukraine promises significant increases to container freight rates at a time shippers already face record spot prices in the trans-Pacific and elevated rates globally. 

Prices for very low sulfur fuel oil (VLSFO) have jumped 26 percent since the Russian invasion of Ukraine on Feb. 24, currently averaging $986 per metric ton at the major hubs of Singapore, New York, and Rotterdam, according to oil price reporting agency OPIS. VLSFO powers 70 percent of the global fleet not fitted with scrubbers. 

The high sulfur fuel oil price of $650/mt is 19 percent higher than two weeks ago, said OPIS. 

Hapag-Lloyd CEO Rolf Habben Jansen told reporters in a press briefing Thursday that rising energy prices were “a real worry.” 

“Fuel prices have gone up from $500 a ton to around $1,000 a ton,” he said. “We burn 4.5 million tons a year, so that means an extra cost of between $2 billion and $2.5 billion.” 

Shippers will feel the pinch of the higher fuel costs via the traditional bunker adjustment factors (BAFs) that typically lag fuel price increases by one to two months. But Habben Jansen ruled out the imposition of deeply unpopular emergency bunker recovery surcharges that were levied in May and June 2018 by several carriers as fuel prices rose ahead of the US-China trade war. 

“Bunker prices are passed on in longer contracts with a delay based on our fuel clauses that are included in the vast majority of our contracts,” he said. “We do not intend to come up with an emergency bunker surcharge because we don’t think it is needed or right at this point.” 

Sea-Intelligence Maritime Analysis estimated in its latest Sunday Spotlight newsletter that if bunker fuel prices remained at their current level all year, the container shipping industry would incur an additional annual cost of $7 billion. That would result in an average fuel cost per TEU of $39. 

Lars Jensen, CEO and partner of Vespucci Maritime, warned in a LinkedIn post this week that the costs would soon be passed on. 

“As the situation still spirals more out of control, we have likely not seen the peak yet and shippers should expect record high bunker surcharges in their next rate adjustments,” he said. 

Record high rates on east-west trades 

Any hike in fuel surcharges will come on top of already record-high rate levels that shippers have faced on the major east-west trades for almost 18 months. 

Short-term rates of 30 days or less from Asia to the US West Coast reached $9,810 per FEU this week, up 144 percent year over year, according to rate benchmarking platform Xeneta. On top of the rate, carriers are charging “priority fees” of up to $6,388 per container to guarantee space on maxed-out vessels. 

Trans-Atlantic rates from North Europe to the US East Coast were at $5,527 per TEU this week, more than double the price at the same point last year. 

On the Asia-North Europe trade, short-term rates are currently at $7,640 per TEU, up 88 percent on last year, with Xeneta indicating a priority fee could be as much as $2,024 per TEU. While far above last year’s level, the rate softened at the end of February, falling $250 to $7,717 per TEU. 

Peter Sand, chief analyst for Xeneta, said in a market update this week that the size of the recent average rate drop varied among the carriers, but the differential between the carrier with the largest rate decline and that with the smallest has narrowed, suggesting the Asia-North Europe trade was becoming more competitive. 

“Fundamentally, growth in demand is not particularly strong, and there is the capacity to meet it, giving shippers more options and forcing carriers more into line and at a lower level,” Sand said. “There is still a long way to go before a return to lower freight rates, but this may well be the start of that journey, with the big caveat that global geopolitical or health-related developments could once again throw basic supply/demand principles out of the window.” 

Contact Greg Knowler at and follow him on Twitter: @greg_knowler.