Watch: This Is Why Biden’s $2 Trillion Infrastructure Plan Will Fail
In the United States, we have a problem that’s so BIG and obvious that even Elon Musk can’t see it. Our highways are broken, our streets are clogged with traffic,...
By Mike Wackett (The Loadstar) – In the face of increasing anger from shippers over emergency bunker surcharges, shipping consultant Drewry too has hit out at ocean carriers for the “failure to control costs” that left them exposed to a fuel price spike.
Drewry said the EBSs were a “desperate move” by carriers that would only partially reimburse them for the surge in bunker prices.
And it would also “alienate small and medium shippers”, it added, given that the major BCOs would most likely have fuel surcharge exemptions written into their contracts.
Drewry said it suspected that the problem had roots in a period of low fuel costs when carriers “simply allowed too many shippers a free pass”, and thus gambled by agreeing all-in rates without any built-in fuel cost adjustment mechanism.
Led by MSC, which described its EBS as “a last resort”, the average quantum of the surcharges is $120 per feu, effective from 1 June – apart from on US FMC-controlled trades where it will be applicable from 1 July.
“Shippers are right to be angry about emergency fuel surcharges levied by carriers,” said Drewry.
It said the universal roll-out of EBSs in the past few weeks had “been met with scorn by shippers who accuse the lines of dirty dealing”.
Indeed, BIFA, the trade association for UK freight forwarders, has challenged the legitimacy of the EBSs, as well as a raft of other surcharges container lines seek to impose.
For example, Hapag-Lloyd announced last week it would implement a worldwide OCR (operations cost recovery) surcharge of $55 per teu in addition to its bunker surcharge. This was due to “the consistently high increase of operational costs in 2018”.
Director general of BIFA Robert Keen said: “The number of surcharges and fees continues to grow – often with no real explanation or justification. For instance, what does an ‘extra administration fee’ or ‘container sealing fee’ cover that is not in the standard service offered?”
Mr Keen argued that the contracted price entered into between the shipper and carrier should not change, and “additional surcharges imposed by shipping lines should not be allowed”.
And with the current furore around the EBS, Drewry suggested that it would be a good time to draw up a new system for bunker costs that “protects both parties”.
It said “pleading poverty is not a good enough reason” for carriers to justify surcharges, despite financial losses incurred in the first quarter and the prospect of worse in Q2.
Barcelona-headquartered online booking platform iContainers agreed there was a need for a “more transparent and long-term solution” to the EBS and other surcharges levied by carriers.
Klaus Lysdal, vice-president of operations said: “The “exasperation felt by shippers is completely understandable,” but suggested it was “fair for carriers to pass on the additional cost to their clients, since it is a cost that they do not control”.
He added: “There is room for improvement in the way [EBS] is communicated to clients. A more transparent way of managing pricing with the clients may be a good workaround to dim the opacity.”
The Loadstar is fast becoming known at the highest levels of logistics and supply chain management as one of the best sources of influential analysis and commentary.
Join the 67,421 members that receive our newsletter.
Have a news tip? Let us know.