Bunker costs have risen so fast that many shipping lines are losing money on particular routes, says a high profile industry player. Ronald Widdows, chief executive of the global container shipping business APL Ltd, said a large part of the industry was operating in the red, even though 2007 had been seen as a good year for shipping. ''Not many people understand the significance of fuel costs,'' said Widdows. ''It makes the whole supply-demand balance a less significant issue.'' ''The cost of fuel goes up very quickly, but rates move up very slowly, and carriers are suffering losses on routes to the US, the Black Sea and on the intra-Asian and trans-Atlantic trades,''he said. Speaking at the 19th Annual Textile and Apparel Importers Trade and Transportation Conference, Widdows said that if the industry could raise rates enough to cover its fuel costs, then it could carry on as it has, but he added: "I don’t think it can.'' ''By January, the industry will know whether it has made the decision that this is important and whether it can try to recover its costs or not. Then there will be structural changes,''he said. Widdows is chairman of the Transpacific Stabilization Agreement (TSA). Last week the alliance announced a new system of 'floating surcharges' and upcoming rate increases in a bid to cover bunker costs.
TSA 's announcement came after comments from Widdows that TSA's members wanted a system that better reflected bunker fuel price fluctuations. According to Widdows, bunker costs are already forcing carriers to cut capacity on trade lanes to the US, an example being announcements by the New World Alliance, of which APL is a member, to cut capacity on its US trade lanes by some 10% during the winter months. ''There is no reason for carriers to add capacity with fuel at $500 (per metric) tonne,''said Widdows. ''It doesn't make economic sense to add capacity.''
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