The 10 container lines in the Westbound Transpacific Stabilisation Agreement (WTSA) have announced plans to begin recovering a greater share of fuel costs in their contracts with wastepaper shippers.
Effective on January 1, WTSA lines say they intend to assess bunker fuel surcharges separately from base freight rates for wastepaper, and allow those surcharges to float, adjusted on a regular basis to reflect fluctuations in world bunker fuel prices.
Wastepaper contracts have typically included provisions mitigating the bunker surcharge and folding it into an all-inclusive rate, owing partly to the low shipment value and unique price structure of US wastepaper shipments to Asia.
WTSA lines are taking a first step with respect to the leading commodity in the trade in terms of volume," said agreement executive administrator Brian Conrad.
"Wastepaper rates are low from the outset, and downward pressure on rates over time has eroded fuel cost recovery buried within the rates. At the volumes wastepaper moves, it is nowhere near making an adequate revenue contribution as fuel costs have risen 55 percent since the beginning of 2007 alone."
More than 233,000 FEU of wastepaper moved from the US to Asia in the first half of 2007, accounting for 18.3 percent of the total westbound market.
WTSA stressed that setting bunker surcharges separately from base rates did not mean lines intended to offset the new surcharges with base rate concessions, nor do the new surcharges preclude separate actions on rates during 2007 as market conditions dictate.
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