TSA members to recover more inland fuel costs on intermodal moves
Transpacific ocean carriers said Monday they plan to start recovering a larger part of the inland fuel costs they incur on the landside portion of intermodal container movements.
Member lines in the Transpacific Stabilization Agreement said they are intent on 'narrowing the gap between what they pay for inland fuel in their intermodal operations and what they collect against those costs through inland fuel surcharges.'
Since January 2007, on-the-road diesel prices have increased 83 percent. The posted inland fuel surcharge has doubled from $232 to $464 per container for long-haul rail and from $67 to $134 per container for short-haul truck during the past year, but in some cases the full amount of that charge is not being collected, TSA said.
TSA introduced a separate inland fuel surcharge in mid-2005 to recover both direct costs and rising surcharges assessed by railroads and motor carriers.
'Inland diesel fuel expenses are distinct from marine bunker fuel costs associated with the oceangoing and shoreside portions of an intermodal move,' the organization said in a statement. 'Recovery of a greater share of bunker fuel surcharges was a key component in service contract negotiations earlier this year.'
TSA lines assess an IFS that is based on the Department of Energy's weekly highway diesel fuel prices, the Burlington Northern Santa Fe formula for long-haul rail intermodal moves, and a separate pricing tier to cover local and regional short-haul truck shipments. Highway diesel prices, according to the energy department, have risen 63 percent in the past year alone — from $2.89 to $4.72 per gallon.
'By contrast, rail and truck carriers have successfully passed through their costs via fuel surcharges, at published levels of around 35 to 45 percent of base rates for railroads, and 35 to 50 percent for truck operators that have distinct tiers for less-than-truckload and full truckload freight,' TSA said. 'Freight shippers who arrange their own inland transportation, and/or are involved in domestic distribution, have been paying these costs directly.'
TSA executive administrator Brian Conrad said the cost impact is often compounded when carriers provide intermodal service using third party transportation companies required by customers, with no control of assets or influence on price increases.
'Ocean carriers are seeing their rail and truck base rates increase, and then those higher rates are raised again by as much as half through fuel surcharges,' Conrad said. 'Container lines have made it a top priority to pass through a greater share of related costs through the IFS and, above all, to return to a floating surcharge adjusted monthly to reflect highway diesel price fluctuations.'
Conrad added that TSA carriers would begin contacting customers in the coming weeks, advising them of IFS adjustments as applicable.
Meanwhile, TSA lines this week reported slower year-to-date cargo volumes relative to 2007, but indicated they expect begin will pick up beginning in late August or early September.
'Asia-U.S. cargo demand in the first half of 2008 appears to be holding steady in the 5 to 6 percent range below totals for the same period in 2007, based on a combination of PIERS figures for the first quarter and April-June volumes reported by TSA lines only,' the organization said. 'TSA lines report slowing of cargo coming out of North China, with factory closings around Beijing and dense fog conditions affecting vessel service at Qingdao seen as the principal causes. Carriers also noted a continued shift in cargo to U.S. East Coast all-water services via Panama and Suez, in part due to uncertainty over the West Coast longshore labor negotiations, and also as intermodal costs have risen significantly.'
Those temporary obstacles suggest that volumes could increase the next two months, TSA said, provided U.S. consumers are able to regain their footing.
'TSA members have gotten varying estimates from their retail and other customers about the second half and the peak season,' Conrad said. 'Some consumer segments are doing better than others, but in general the expectation is for a surge in cargo at the end of the summer, leading into at least a modest peak season.'