Long term solution needed to deal with fuel surcharges issue: iContainers

While the move to implement Emergency Bunker Surcharges (EBS) is a fair move by the shipping lines, a more transparent and long-term solution for implementing these charges is required, according to iContainers.

This week, ONE was the latest to join Maersk, MSC, and CMA CGM in introducing the EBS due to increasing fuel costs. According to Alphaliner figures, they would make up more than 52% of the global container capacity.

While the moves have provoked criticism from shippers, completely online freight forwarder iContainers pointed out that the trickle-down cost, while frustrating for shippers, is a fair move by the shipping lines.

“The Emergency Bunker Surcharge is a result of market movements. At the end of the day, it’s fair for carriers to pass this additional cost on to their clients since it’s a cost that they do not control and can change drastically depending on factors that they have absolutely no influence over,” says iContainers vp of operations Klaus Lysdal.

Some shippers have claimed the lines should be taking more responsibility for the increase in cost. There may be others, however, who would much rather face the anticipated price hike than risk other adjustments, noted iContainers.

Read More: ONE joins big 3 lines in levying emergency bunker surcharges

“The exasperation felt by shippers is completely understandable and natural. But despite the backlash, I reckon some shippers would prefer to pay a little more overall and have fewer  surprises come into their supply chains such as changes to rates and services,” noted Lysdal.

Indeed Lysdal said this method of implementation and its standalone nature are stark improvements to the level of transparency the industry was experiencing before.

“To a certain extent, the EBS now stands out as an independent surcharge as more and more carriers improve their rates transparency. Several carriers have already cut back greatly on the different types of charges they work with. In fact, just a few years ago, several carriers admitted having so many line charges that it was getting hard even for them to keep up,” said Lysdal.

“As it stands, some operate with a basic fuel cost that’s included into the total freight charge. But with such a policy, carriers take a calculated risk with gains and losses dependent on actual fuel prices and the cost they decide to build into their rates.”

Although the EBS may be seen as an unfortunate side effect of carriers’ efforts to inject more pricing transparency, iContainers says ultimately a better and more sustainable solution will be needed in the long run.

“There is room for improvement in the way it's communicated to the clients. A more transparent way of managing pricing with the clients may be a good workaround to dim the opacity,” said Lysdal.

“The cost is there, and they have to make a call to recover what they would otherwise lose from it. But hopefully the liners can create a mechanism that’s just to all parties sooner rather than later,” he concluded.

Posted 08 June 2018

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Vincent Wee

Asia Editor, Seatrade Maritime News