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Shippers urge carriers to be 'honest and transparent' about LSF costs

Shippers urge carriers to be 'honest and transparent' about LSF costs
Shippers are demanding honesty from shipping lines about the cost of low sulphur fuel (LSF) as many carriers launch surcharges as the 2020 global sulphur cap approaches

The Global Shippers Forum (GSF) met in London to discuss changes to the industry’s trading conditions – and a top item on the agenda was the number of surcharges levied by ocean carriers.

Freight Transport Association deputy chief executive and GSF secretary general James Hookham told Container Shipping & Trade, “Shipping lines are still buying ships that are too big for the trade available and slashing base rates to fill them to get economies of scale. They find they have not got a securely profitable business as a result of that and resort to surcharges as a way of making up the differences.”

“No doubt plenty of shipping line executives would challenge that, but that is what it feels like – shippers being used to find additional sources of revenue, often on very spurious and unjustified grounds to make up the shortcomings of a broken industry.”

GSF board of directors’ chairman and Sri Lankan Shippers’ Council chairman Sean van Dort told Container Shipping & Trade Sri Lanka identified 44 surcharges for Sri Lankan shippers that “had no meaning”. He cited examples “Like shippers are responsible for cleaning the containers or damaged containers when it is clearly the terminals handling them.” He also cited the example of an equipment imbalance charge. “We are not here to manage their fleet… all these surcharges end up on the plate of the consumer.”

On low sulphur fuel surcharges, he said, “This is another façade because fuels costs are already embedded in the costing, so that is double accounting.”

Mr Hookham added “When contracting with alliances, you never know which ship [cargo] will end up on.” He said this meant a shipper could pay a low sulphur surcharge but end up using a ship equipped with a scrubber or LNG propulsion. “We would not expect to see a retrofit passed on as a surcharge,” he said.

“Low sulphur fuel is more expensive and therefore we need some honesty from shipping lines and transparency about what it is actually costing.”

He called for a mechanism to be “actually related to the real cost of fuel around the world, and which will fall as the cost of fuel falls”.

Mr Hookham added “This cannot become like the verified gross mass surcharge – a bit like a surcharge fest where everyone is charging everyone else for the cost of weighing containers. That is why shippers are so sceptical and hesitant about the claims of shipping lines.”

The conclusions of GSF’s meeting include the hope to work with consultants to track the price of fuel and collect evidence of surcharges to see “what real costs are and help shippers to make informed decisions about whether it is a justifiable charge or not”.

Mr Hookham opined “I think shippers will be pushing back on a lot of the demands made, certainly no one should pay [low sulphur fuel] surcharges now, as no shipping lines are using low sulphur fuel in places where they don’t have to at the moment.”

The aim of the GSF is to have a proper, negotiated structure where an all-in price is agreed and where there are “genuinely confidential contracts, so elements like improved service can be negotiated and delivered.”

Speaking about the long-term aim, Mr Hookham summed up, “There is a willingness from shippers to sit down with shipping lines, but it takes a brave shipping line to do this. However, I think there are big opportunities for shipping lines to get closer to their customers and hear what they want and what they are willing to pay for.”


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