A discussion group of 14 carriers in the Asia/U.S. trade is recommending its members start including a "full floating bunker surcharge" in all new service contract.
The Transpacific Stabilization Agreement estimates that there has been a gap in excess of $5 billion between what its members spent on marine bunker fuel from February 2006 through August 2007, and the total fuel surcharges they collected for that same period.
The group said it is essential they are able to recover a greater share of costs quickly and that fuel surcharges in all their contracts float with world fuel price fluctuations in world markets
TSA said failure to fully recover fuel costs in its members service contracts to date "is not sustainable given current extraordinary fuel price levels."
The heavy bunker fuel that most ships burn was selling in Singapore today for $487.50 per ton after peaking at $514 a ton last week. But it is still much higher than the $280 a ton it sold for just one year ago.
"There current contractual commitments have been met, carriers will seek an immediate adjustment in the contract to bring bunker recovery to a full floating basis. Some carriers may seek to accomplish this through application of a separate extraordinary bunker charge,"TSA said.
Many carriers in the Asia-to-U.S. trade have written service contracts with no bunker surcharges or contracts that do not fully recover rising fuel prices.
"The contractual provisions that in some cases limited bunker recovery were entered into at a time when bunker costs were significantly lower, and when the recent spike in fuel costs could not have been anticipated," said Brian Conrad, the TSA's executive administrator. "We are now seeking customers' help in sharing in the exposure caused by this unexpected price escalation. It is only fair for carriers to recover these costs, as does virtually every other industry where extraordinary fuel costs are incurred." The TSA said even where contractual commitments are ongoing, carriers intend to contact customers who do not have the full floating bunker provision in their contracts to seek mutual agreement to increase the level bunker adjustment factor recovery now, to a full floating basis.
TSA Chairman Ronald D. Widdows said, "There is no possible scenario under which container lines, with 50 percent of their operating costs per sailing tied up in fuel, can lock in a fuel surcharge for a year without hemorrhaging money, and eventually without carrier viability itself threatened. If not addressed, this situation would result not only in substantial losses for the carriers, it would also make it financially difficult for them to invest in the assets necessary to provide the service in the trade that shippers have come to expect." TSA members are APL, "K" Line, CMA-CGM, Mediterranean Shipping Co., COSCO, Mitsui O.S.K. Lines, Evergreen Line, N.Y.K. Line, Hanjin Shipping, OOCL, Hapag-Lloyd, Yang Ming, Hyundai Merchant Marine and Zim.
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