Carriers take advantage of low fuel costs to reroute via Cape

4/27/2020

The collapse in the price of oil has not stopped container lines’ efforts to retrofit exhaust scrubbers to their vessels, but it is giving them an incentive to save on canal costs by rerouting many of their services.

With oil prices hitting record lows in the past week as demand collapsed, bunker prices are also falling.

IFO380 fuel oil prices have fallen to $190 per tonne in Singapore and $163 per tonne in Rotterdam, while low-sulphur fuel prices are at $262 per tonne and $218 per tonne, according to Alphaliner.

“Despite a reduction in the low-sulphur fuel price spread to only $50-$70 per tonne, containership owners do proceed with their scrubber retrofit programmes,” Alphaliner said. “At least 20 vessels have entered shipyards for retrofitting in April, joining some 35 units that entered the yards in March.”

But while vessels continued to go to yards for retrofits, the total number of boxships undergoing retrofit work had fallen from a peak of 119 units in mid-March to 90 units, it added.

“Retrofits are expected to continue in the coming months, with scrubber fabrication and engineering works already well advanced for units that were ordered several months in advance, before the fuel price dropped to the current lows.”

Meanwhile, more carriers are set to benefit from using the lower cost of oil to reroute several services around the Cape of Good Hope in an effort to avoid the Suez Canal and its associated costs.

With the fees for a 20,000 teu boxship to transit the Suez Canal costing around $700,000, the amount saved by rerouting easily covers the additional fuel costs even on non-scrubber fitted vessels burning low-sulphur fuel.

French carrier CMA CGM has to date been the only carrier to use the longer route on the westbound headhaul route from Asia to northern Europe, but Alphaliner said others would be following suit, particularly for backhaul voyages.

2M alliance carriers Maersk and Mediterranean Shipping Co are expected to reroute the last of its suspended AE2/Swan voyages via South Africa, while Evergreen is also taking the Cape routing for one of its return voyages.

Meanwhile, a number of Ocean Alliance and The Alliance voyages from the east coast of North America are also being routed directly to Asia on the backhaul.