As the shipping industry faces new trade and regulatory challenges, the fuel adjustment factor adopted by container carriers will significantly increase next year.

Starting from January 1st, BAF tariffs have been significantly increased on trade routes, but there are significant differences in tariffs between different carriers.

For example, for dry goods transported from Asia/Far East, the Indian subcontinent, the Middle East Gulf, the Red Sea, and Bangladesh to/through the East Coast of the United States, the Gulf Coast of Mexico, or the East Coast of Canada, the revised BAF rate for CMA CGM will be $602 per TEU, $669 per FEU, and $847 per 45 foot high square box.

The relative tariffs on refrigerated goods will be $723, $803, and $1016, respectively.

Other major airlines, including Maersk and Zim Line, have also announced similar revisions.

As demand remains a major pain point, it remains to be seen to what extent airlines can drive cargo owners to profit from significant price increases in BAF.

According to sources from freight forwarders, the market is very unstable, and carriers often adopt different strategies, at least to maintain stable rates, if not moderately increased.

Therefore, freight forwarders typically believe that the all inclusive rates of two competing operators may appear to be more or less the same, as one party attempts to lower the basic sea freight price to apply a higher BAF amount, while the other party may be exactly the opposite.

It is undeniable that container shipping companies are dealing with soaring operating costs, as the tense situation in the Red Sea and transportation restrictions on the Panama Canal, as well as stricter decarbonization regulations set by the International Maritime Organization (IMO), are driving up operating costs.

"So far this year, container volume has decreased by nearly 2% year-on-year, while average freight rates have decreased, reaching the level of 2019 in September. Since then, they have continued to decline. However, charter costs are still 25% higher than in 2019," said Niels Rasmussen, Chief Shipping Analyst at BIMCO.

Rasmussen also pointed out that "liner operators continue to work hard to cope with the deteriorating supply-demand balance, which has affected freight rates. On average, since the beginning of this year, fleet growth has increased by 5% and 19% respectively compared to 2022 and 2019. On the other hand, container volume has decreased by 2% compared to 2022 and only increased by 1% compared to 2019."

He further explained, "On the other hand, the key cost items of liner operators have not followed the rates. So far this year, although the cost of ultra-low sulfur fuel oil has decreased by 29% compared to 2022, it is 5% higher than the level in 2019. For ships equipped with scrubbers, the price of heavy fuel oil has decreased by 22% compared to 2022, but is 22% higher than 2019."