A rapid rise in fuel prices, low surcharge levels to date and mounting operational pressures has created new urgency for carriers to achieve full, floating surcharges.
Member shipping lines in the Westbound Transpacific Stabilization Agreement (WTSA) have stepped up efforts to reach their 2008 goal of achieving full, floating bunker fuel surcharges across the board.
As previously announced, WTSA lines will raise their bunker surcharges, effective July 1, 2008, to $600 per 40-foot container (feu), or the full formula level in effect at the time, whichever is lower. As of October 1, surcharge levels for all tariff and contract cargo will be increased to the full, floating bunker surcharge in effect at that time, and will then be adjusted monthly to float with fuel price fluctuations under the WTSA calculation formula.
‘With the inbound Asia-US trade flat, and with fuel, inland intermodal and other costs rising, westbound traffic must truly begin to pay its own way,’ explained Brian M. Conrad, WTSA executive administrator.
WTSA carriers have gotten modest, incremental increases in freight rates during the past two years, Conrad said, but those have not kept pace with inland transport and equipment-related costs. Renewal of long-term intermodal rail contracts has meant 25-35% rate increases, for loaded and repositioned empty containers. Trucking rates have risen by a similar degree, through a combination of rates and fuel surcharges. Cargo handling costs at port terminals and inland distribution points have also increased dramatically.
‘Unfortunately, retail merchandise from Asia is not delivered anywhere near where pork, cotton or chemical resins are loaded for export,’ Conrad pointed out. ‘Sometimes specialized equipment is required. Positioning that equipment entails transport, storage and handling costs that lines will continue to recover through the base rate structure. Once the loaded container is stowed aboard ship, if fuel is 60% of the sailing cost and fuel prices have doubled since January 2007, that’s a 60% increase in the operating cost per slot over 18 months. In many cases carriers are not recovering the pre-2007 base cost, let alone that increase.’ Operational factors will continue to exert upward pressure on rates, even as higher fuel prices will prompt carriers to collect a greater share of published fuel surcharges in the near to mid-term, Conrad said.