Shipping Costs Rising Throughout the World

Shipping costs have gone up as the world continues to recover from the Covid-19 pandemic, and shippers attempt to navigate the waters. Cargo exporting and importing to international supply chains is no small feat. The new carbon tax may significantly increase freight costs for shippers to exceed current levels.

The Ins and Outs 

The rise in shipping costs is a complex issue, and so much goes into it. All those associated with the import and export business should research and learn as much as possible about it. A lot of effort has gone into finally establishing energy efficiency measures for existing ships. A further proposal for introducing a carbon tax on bunker fuel is now possible. This tax could act as an incentive for switching to fuel options with lower carbon emissions and potentially double the current price of traditional fuels. Efforts seeking to mitigate the effects urge regulators to ensure that shipping lines can remove the older capacity from the market. It is uneconomical; to upgrade to progressively more demanding levels of performance.

How to Calculate Rates

When demand is not enough, it will result in higher freight rates. On another note, Bunker Adjustment Factors (BAF) as vastly used, and the expansion of new surcharges in preparation to respond to the introduction of Low Sulfur Fuel has caused shippers to be very cautious about how much of this proposed carbon tax. However, the shippers will gain forgiveness for thinking that the proposal will inevitably result in still higher freight rates because the shipping industry has significantly efficient methods for passing through higher fuel costs by creating a surcharge to cover fuel price variations. Luckily, reassurances are there so that the existing proposals for a Carbon Tax will not simply press through as an added cost for shippers. 

Further Considerations

There is no denying that shipping costs have risen significantly. However, there are so many opinions and speculation surrounding this topic. The shipping industry may use Market-Based Mechanisms as a way to decarbonize. Likewise, it is vital to insulate its customers from the inflationary results. Emissions will go down by suppressing demand for world trade instead of incentivizing the urgent changes needed for fuels and propulsion technology. Associations and policymakers should consider the realities of the shipping market and avoid simplified comparisons of what other economic sectors have experienced. Shipping has unique factors, and there must be a treatment for that. Those in the industry should consider the benefit of securing marine cargo/stock throughput insurance because you never know what to expect and can never be too safe in protecting your business. 

About David G. Sayles Insurance Services

At David G. Sayles Insurance Services, we help our clients decide which of these options is best for them based on their current situation and risk factors. Contact us at 1-855-977-1842 or insureme@dsayles.mysites.io for a consultation!