Navigation fuel price soars and should pressure cargo freight

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While Petrobras is holding transfers from the soaring price of oil to the price of gasoline and diesel, cargo transport is already beginning to feel the effects of the war in Ukraine on its costs, with the increase in navigation fuels.

According to S&P Global Platts, these products reached historic records in Latin America after the start of the conflict in Eastern Europe. In the Port of Santos, the main port in the country, they are already approaching US$ 1,000 (R$ 5,000) per ton, according to the sector.

Shipping companies say that today is the main concern of the sector, which has already lived with high freight rates since the stoppage of industrial activity at the beginning of the pandemic unbalanced global logistics.

“At the moment, the most evident concern is the rapid increase in fuel costs”, says, in a note, the CentroNave (National Center for Transatlantic Navigation), an entity that brings together the 19 largest long-distance navigation companies operating in Brazil.

The entity says that the impacts of the war on the world transport of containers are still small and located in the conflict region. “However, it is necessary to consider that this is a volatile scenario and that the situation can change quickly.”

Unlike gasoline and diesel, in which the adjustments are defined by an internal Petrobras committee according to the evolution of market conditions, the prices of fuel for navigation are changed daily.

On Tuesday (1st), according to S&P Global Platts, the bunker with 0.5% sulfur, most used in the engines of large vessels, hit US$ 798 (about R$ 4,000) per ton in Santos.

According to Abac (Brazilian Association of Cabotage Shipowners), the price reached US$ 900 (R$ 4,500) this Thursday (2). At the beginning of 2020, the price of the product hovered around US$ 680 per ton.

Marine diesel, known as MGO and used mainly for power generation on ships, reached US$893 a ton on Tuesday, also the highest price on record since the consultancy began monitoring the port in 2016.

The president of Abac, Luiz Resano, says that the large ships usually have large stocks of fuel, but they will soon start buying products with the highest prices.

The freight contracts, he says, usually have clauses that allow the immediate transfer of large fluctuations in the price of fuel. “If the price does not fall in the short term, there will be an impact both on cabotage and on the long haul”, he says. “And shipping will certainly increase.”

The president of the AEB (Association of Foreign Trade of Brazil), José Augusto de Castro, says that there is still no impact of the current crisis on the cost of freight, but the expectation is that prices will be even more pressured.

“For now, everyone is paralyzed to see what will happen”, he says. “But if the freight increases even more, it will end up making some operations unfeasible.”

Sought, Petrobras stated that it “maintains its commitment to the practice of competitive prices and in balance with the international market”. The company also said that bunker prices in the world’s main ports “follow the dynamics of oil, which was already coming from a moment of high volatility, aggravated by recent events”.

Petrobras has been repeating that it is observing the scenario before deciding on transfers to gasoline and diesel prices, a decision that has the support of representatives of private shareholders on the company’s board of directors, according to Petrobras. sheet found out.

In the financial market itself, there are doubts about the feasibility of readjustments at this time. Analysts at UBS BB, for example, believe that the state-owned company will not change prices now.

“We agree that uncertainties remain high and that the scenario is still not clear”, wrote analysts Luiz Carvalho, Matheus Enfeldt and Tasso Vasconcellos, who see domestic prices 25% below international quotations.

They add that readjustments at this time have high political and reputational costs, as they could fuel advocates of changes in the company’s pricing policy.

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