(Transport Weekly)
More recent easing of prices likely to bring down surcharges beginning in October; shipping lines hold firm on floating bunker contract terms.
Container lines in the Transpacific Stabilization Agreement (TSA) have confirmed that their floating bunker fuel surcharge, adjusted monthly according to a formula that tracks world fuel prices at key loading locations, will spike to a record level effective September 1. The higher surcharge reflects record fuel prices that topped $767 per ton in mid-July, up from $500 at the beginning of 2008 and $296 at the beginning of 2007.
Responding to questions that have been raised as to why the bunker charge is increasing at a time when fuel prices have been falling, N.Y.K. Line vice president and TSA revenue policy committee member Bill Payne emphasized that each month’s surcharge reflects average fuel prices during a reporting period 30-60 days earlier. This is done to comply with U.S. law requiring a minimum 30 days’ advance notice to the market in the event a particular rate or surcharge is to be raised. “Carriers pay the higher fuel costs out of pocket as those costs rise, cushioning the impact on shippers, and then must pass them through after the fact,” Payne said. “The good news with a floating formula is that, as prices fall, customers will start to see savings 30 to 60 days out.”
The TSA surcharge is posted by the carrier group as a guideline for the market, but service contracts with customers – including bunker surcharge terms – are addressed individually by the lines. APL senior vice president Bob Sappio, also an RPC committee member, noted that while carriers and shippers have made significant progress in agreeing on a floating fuel surcharge, much more work remains. “If people think the high price of fuel is temporary they are mistaken”, Sappio said. “The transpacific trade is simply not sustainable as it is presently constituted; carriers must recover a greater percentage of actual dollars spent on fuel.”
Showing posts with label Fuel Surcharges. Show all posts
Showing posts with label Fuel Surcharges. Show all posts
Tuesday, August 26, 2008
Wednesday, June 25, 2008
CTA’s Bradley Offers Advice to Shippers
(Truck News)
David Bradley, CEO of the Canadian Trucking Alliance (CTA), warned shippers at the Pharmaceutical and Personal Care Logistics Association that they will have to continue paying sufficient surcharges in light of rising fuel costs.
“However you cut it, whatever fuel surcharge formula you use, carriers need to generate enough revenue to survive,” he explained. “The combination of the base rate, fuel surcharge, accessorial and other charges must add up to an amount that provides for an adequate return on investment. Two plus two must equal four at the end of the day.”
Bradley pointed out that 40-50% of carrier revenues currently result from fuel surcharges. While he admitted that’s “bizarre” he also said “putting that genie back in the bottle is extremely difficult.”
He went on to say: “Changing fuel surcharges in isolation of rates is not tenable for carriers. You want a new formula, fine. But you have to look at all the fuel used to pick-up and deliver your load. You want lower fuel surcharges, fine. But then rates have to go up. Whatever formula you come up with, carriers want you to stick to it.”
Finally, Bradley urged shippers to take a long-term view and to secure capacity now.
“Many markets are soft right now, there is excess capacity and changing balance. But the capacity situation will resolve itself and when it does things could tighten quickly.”
David Bradley, CEO of the Canadian Trucking Alliance (CTA), warned shippers at the Pharmaceutical and Personal Care Logistics Association that they will have to continue paying sufficient surcharges in light of rising fuel costs.
“However you cut it, whatever fuel surcharge formula you use, carriers need to generate enough revenue to survive,” he explained. “The combination of the base rate, fuel surcharge, accessorial and other charges must add up to an amount that provides for an adequate return on investment. Two plus two must equal four at the end of the day.”
Bradley pointed out that 40-50% of carrier revenues currently result from fuel surcharges. While he admitted that’s “bizarre” he also said “putting that genie back in the bottle is extremely difficult.”
He went on to say: “Changing fuel surcharges in isolation of rates is not tenable for carriers. You want a new formula, fine. But you have to look at all the fuel used to pick-up and deliver your load. You want lower fuel surcharges, fine. But then rates have to go up. Whatever formula you come up with, carriers want you to stick to it.”
Finally, Bradley urged shippers to take a long-term view and to secure capacity now.
“Many markets are soft right now, there is excess capacity and changing balance. But the capacity situation will resolve itself and when it does things could tighten quickly.”
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