Lines' justification fails to impress shippers

Alan Peat AS SHIPPERS heaved a sigh of temporary relief over the moratorium placed on the imposition of the congestion surcharge of $75 per 6m container in the port of Durban (see lead story), the SA Shippers' Council (SASC) continued to reject the lines' justification for the level of the surcharge. Referring to an explanation by the Container Liner Operators' Forum (Clof) of how this level was reached (FTW February 15, 2002), SASC executive director Nolene Lossau said the explanation was still full of holes. The first of the lines' points she countered was the statement from Clof that one of the variables in their own formula related to extremely long delays to their ships during the congestion period. "They averaged anything between 20-80 hours over the last six months," said Clof, "and often even higher". This, it added, pushed up the ships' speeds on the main legs of the voyage and faced the lines with "substantially higher" fuel costs. Average delay But, Lossau told FTW, "while there were much longer delays just after the strikes and at peak periods, the average delay (according to the Portnet figures) over the last 13-months (January 1, 2001 to January 29, 2002) has been 18-hours. "The service level agreements (SLAs) that the lines have in place with Portnet are based on a 16-hour average delay." The fact that the lines have had to omit certain overseas ports of call to regain their schedule integrity - resulting in poor service to overseas customers, and additional feeder costs to the lines - also failed to impress Lossau. "What about the poor service that the SA importers and exporters have had to endure?" she asked. "The cargo owners have had to deal with these problems as well, and have also lost orders and the like. "Granted, the lines have had some additional costs to tranship/feeder containers. But the decision on ship calls must have been based on economic principles - and must have included these additional costs versus the cost for the delay and/or disruption to their schedules." Lossau is also doubtful at the Clof claim that "in a number of cases, lines have introduced an additional vessel to the existing fleet to win back reliability". "I am only aware of one extra vessel having to be added to the SA Europe Container Services (SAECS) fleet," she said. "Perhaps Clof can quantify exactly which other lines have introduced extra vessels. "Of course, the extra vessels that are normally added to cater for the peak season imports from the Far East should not be included in these details - as this is a normal occurrence in the second half of every year!" While Lossau acknowledges that the lines will face a cost for the extra equipment they need to compensate for the slower turn-around of containers, she argues that this is no big figure. "Even if the average additional time per container is five days, this is a not huge sum," she said. "The lines lease containers (when they are not owned containers at a much lower price) at about US$3 per day. This equates to approximately US$15 extra per TEU. Divide this in half (split between imports and exports) and this becomes US$7.50 per shipment." Lossau also rejects Clof's argument about "transhipment of containers in Durban" having created additional cost. "What transhipment cargo are they referring to?" she asked. "If it is international transhipment cargo, why must the SA importers and exporters pay these costs? The congestion surcharge is not being levied on the transhipment cargo - so why must we subsidise this?" Lossau also has no sympathy for the claim from Clof about their "substantial costs" in people time. Additional workloads "The cargo owners," she said, "have also experienced massive additional workloads due to the problems at the port. "The "cutting" from the berth before the completion of the cargo loading has also adversely affected the exporters. It results in letters of credit (L/Cs) being invalid when parts of shipments are left behind and cancelled orders when the buyers perceive SA to be unreliable suppliers." Clof also highlighted the cost of waiting time outside ports. "Obviously," said Lossau, "if the vessels have omitted the calls at Durban and have incurred any of the other costs Clof detailed - like extra landside costs, for example - then the costs we calculated for waiting outside have to be deducted from the calculations. "The lines would incur one or two of the costs they mention depending on how the shipment was handled. But they would never incur ALL of these costs. "Perhaps the lines should give us two specific examples of their costs - that is, a shipment where the vessel had waited to berth in Durban, and a shipment where the vessel bypassed the port." Lossau also challenged the Clof assertion that the surcharge of US$75 is, in many respects, a limited recovery, and the contention that that it bears no relation to any contingency "built into the freight rate" - as the SASC had suggested in its previous objections to the surcharge. "Market forces drive the freight rates," she said. "The fact that freight rates have not increased in US$ terms is based purely on the market, and is not relevant in this debate, except perhaps to highlight once again that the lines are using this as a revenue generating exercise!"