Shipping CoAs rise in line with bunker fuel hikes

18 January 2008 14:23  [Source: ICIS news]

LONDON (ICIS news)--Contracts of affreightment (CoA), negotiated by charterers with shipowners, were said to have increased 5-10% on rising bunker fuel prices, said European brokers today.

Contracts that were agreed on shorter trades generally increased by smaller amounts, while with the deep sea trades on the Atlantic and Asia routes contract prices increased by up to 10% on average.

“The deep sea trades see ships travel longer distances, therefore, they use more fuel and that means the new CoA deals reflect that,” said one broker.

“If you took the increase in the price of bunkers out of the CoA price increases I don’t think that freight rates would have risen at all,” he added.

Many contracts are negotiated annually towards the end of each year and at the end of 2007 there were two major influences on the negotiations: the price of ship fuel, known as bunkers; and the spot price for shipping materials.

In the first instance the high price of crude oil, which had risen to prices close to $100/bbl, doubled the price of bunkers from around $280/tonne (€191/tonne) to close to $550/tonne during the course of last year.

Moreover, the looming slowdown in the world economy along with the number of available vessels, as significant numbers of newly built ships are delivered, has seen the spot price for ships fall significantly in some trades.

Shipowners’ main concern of the two was the huge increase in their costs represented by the price of bunkers. A broker said that a 10,000 dwt ship would use 20 tonnes/day of bunkers.

At $500/tonne that represents $10,000/day just in fuel costs.

($1 = €0.68)

By: Nick Savvides
+44 20 8652 3214

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