Transpacific lines get “serious” about fuel recovery in contracts
Transpacific lines get “serious” about fuel recovery in contracts
Transpacific Stabilization Agreement ocean carriers have reported significant rate increases in the first round of service contracts signed by U.S. importers, in what the TSA describes as a “relatively slow contracting season.”
The TSA said there has also been progress in achieving staged bunker surcharge increases closer to the agreement’s full formula levels, and provisions allowing for monthly adjustments to match fluctuations in the global fuel markets.
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Widdows |
“Admittedly, the carriers have sent mixed signals to the market in the past about whether we were truly serious in addressing revenue and cost issues in our pricing,” said Ronald D. Widdows, TSA chairman and chief executive officer of Singapore-based carrier APL. “Understandably, shippers were holding back to see if this time we're serious. I think it has become apparent that our industry faces a financial crisis, that past concessions on rates and fuel surcharges have now come back to affect service levels and carrier viability, and that yes, this time — out of necessity — the lines are quite serious.”
Widdows said the weighted average bunker fuel price in the transpacific topped a record $543 per ton on April 14, as highway diesel fuel crossed the $4 per gallon threshold for the first time.
To highlight the container industry’s disciplined stance towards getting the desired rate increases and fuel compensations, the discussion agreement said that individual carriers have advised shippers that existing contracts will not be extended beyond their April 30 expiry date in order to complete negotiations or allow for additional shipments. In those cases, cargo tendered by customers on or after May 1 will begin moving at tariff rate levels.
“TSA carriers have sat down with customers and run the spreadsheets, showing the impact that fuel price volatility has had on their own individual sailings,” Widdows said. “These are real costs that have been accrued over time and fully paid in other trade lanes. Carriers want to build as much pricing stability as possible into their contracts, but our largest single operating cost has nearly doubled in three years — price certainty over the next 15 months in the current oil market is simply unrealistic for any of us to expect.”
In addition to re-establishing full, floating bunker surcharges, TSA lines are seeking rate increases in their 2008-2009 contracts of $400 per 40-foot container to the West Coast, and $600 per FEU for intermodal and East Coast all-water shipments, along with a $400 per FEU peak season surcharge in effect from June 1 through Oct. 31.
TSA members are APL, “K” Line, China Shipping Container Lines, CMA CGM, COSCO Container Lines, Evergreen Line, Hanjin Shipping, Hapag-Lloyd, Hyundai Merchant Marine, Mediterranean Shipping Co., Mitsui O.S.K. Lines, NYK Line, OOCL, Yang Ming and Zim.