Your position:Home > News > Sino-US trade war and Brexit m.....

Sino-US trade war and Brexit may make freight demand peak in spring 2019

  • Author:Rita
  • Source:Sunny Worldwide
  • Release Date:2018-12-27
According to Platts, the container market will face in 2019 as fuel prices fluctuate and the International Maritime Organization (IMO) has uncertainties about the 0.5% sulphur emission limits imposed on the global seas by January 1, 2020. Strong resistance.

Sino-US trade war and Brexit may make freight demand peak in spring 2019

Oil price

The sharp changes in oil prices in the last quarter of 2018 have once again exposed the current situation of deaf people who will include fuel costs in sea freight.

In November 2018, the average monthly Brent crude spot trade (dated brent) price fell by 16.67 US dollars to 64.48 US dollars / barrel, down 20.5% from October's 81.15 US dollars / barrel.

The last month of December did not allow many anxious market participants to see changes in oil prices. Crude oil prices and fuel prices continue to fluctuate due to factors such as OPEC production cuts, Iranian sanctions exemptions and US crude oil production growth.

The rapid changes in fuel prices in the fourth quarter made carriers, shippers and logistics companies face challenges in negotiating annual freight contracts in 2019. Fuel cost recovery mechanisms typically use the quarterly average fuel price of fuel at critical ports to determine the baseline fuel charge per container.

According to sources, when the price fluctuates irregularly, in the general freight container contract, it is a frustration to agree that the fuel surcharge and the general freight elements in the container contract will be against the counterparty.

According to shipping sources, along with the new regulations of the International Maritime Organization (IMO) 2020 and many other concerns that follow, this volatility indicates that 2019 will be a very turbulent year.

Fuel surcharge mechanism

The International Maritime Organization (IMO) requires all shipping vessels to reduce the fuel oil capping limit from 3.5% to 0.5% after January 1, 2020, which brings many unknown factors to the container market. Carriers will have to consider many factors in the fuel surcharge (BAF) mechanism, including other factors such as 0.5% of blended fuel oil prices, scrubber adoption, and so on.

A source at a large retail company said: "This has become so complicated, and even carriers are trying to explain their fuel surcharges to us." "The regular adjustment of [fuel charges] will be our next year's costing, budgeting And the audit caused serious damage.” The general lack of transparency in the BAF mechanism proposed by the carrier may result in the shipper depressing the freight rate in the spot and next year’s annual contract to make up for the high fuel surcharge that may be considered unfair.


Freight will also be affected by geopolitical processes, such as the Sino-US trade war and the Brexit, both of which may cause freight demand to peak in the spring of 2019.

Trade tensions between China and the United States have provided a powerful boost to container shipping in 2018. Whenever the United States imposes a new round of tariffs on Chinese goods, shippers are eager to ship the goods to the Pacific to avoid shipping additional charges before the tax increase time. This has led to a significant increase in freight demand and higher freight rates than expected in the fourth quarter.

On the 14th, the US Trade Representative Office officially changed the tariff on China's $200 billion product from 10% to 25% in the Federal Register to 12:01 on March 2, 2019. Industry participants expect freight demand to rise again in the first quarter of next year.

Similarly, Brexit, which will be held on March 29 next year, may lead to a surge in shipments from North Asia to the UK on a short-term basis. British retailers are expected to restock their stocks before tax increases.