Schednet 28/1/08

Bunker surcharges, capacity cuts win cost recovery, says TSA chief

TRANSPACIFIC Stabilisation Agreement chairman Ron Widdows is "seeing widespread success in achieving needed fuel surcharge increases," which have gone a long way to rectify the profitability crunch that faced the quasi-conference's 15 member shipping lines.

"The numbers are telling us that although transpacific growth did moderate during 2007, utilisation has remained relatively high during the winter season," said Mr Widdows, who is also president and CEO of APL, the container arm of Singapore-based NOL

TSA carriers have experienced 94 per cent utilisation to the US west coast and 91 per cent to the east coast (all-water) in the recent fourth quarter, the TSA said, attributing the increase partly to deliberate capacity reductions the last year.

TSA, a "discussion group", recently announced in the form of a recommendation to its members, a "full floating bunker surcharge" in new contracts to counter rocketing oil prices.

In November, the TSA announced that more than US$5 billion gap existed between what lines spent on fuel and what they collected in surcharges the year before.

But the results of recent fuel surcharge increase have been "gratifying," said Mr Widdows. "It indicates that customers understand the financial pressures affecting our industry and the need for carriers to make an adequate return."

While helpful, today's fuel cost recovery gains do not go all the way, and what is needed, he said, is a full bunker fuel surcharge, based on the TSA's own floating formula.

The TSA said its members are reporting heavy bookings ahead of Chinese New Year, and expect swelling cargo capacity demands into March and April as the Beijing Olympics approach.

"We will be monitoring the market very carefully in the early part of this year," said TSA executive administrator Brian Conrad. "We know that overall cargo growth will be slower, perhaps on the order of three per cent to five per cent during 2008."