Shippers bleat at peak season surcharge

28 Apr 2000 - By Staff reporter

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'It's the third in three months'
Allan Peat

SHIPPERS ARE up in arms about constant freight rate increases and surcharges being imposed by the shipping lines.
The latest complaint surrounds recent increases in the freight cost of importing containers from the Far East on conference lines - three hikes which have added anything up to 50% to the cost of bringing a box in, according to the SA Shippers Council.
First we saw the bunker surcharge going up from US$50 to US$100 on April 1, said executive director Nolene Lossau.
Then, from May 1 we faced a US$200 GRI (general rates increase) for each TEU (twenty foot equivalent unit). As though this was not enough, the lines have decided to charge a US$200/TEU peak season surcharge from June 1.
That's adding a lot to our freight costs.
Reminded by a spokesman for one of the major lines that the peak season surcharge on container imports from the Far East had been announced by the Tokyo-based Japan and Hong Kong Conference some months ago, Lossau's terse reply was: So what.
The lines here are not kidding us that they're not part of the decision making process.
It would also have been normal business courtesy, she added, for the lines to have included a reminder of the forthcoming surcharge along with their announcement of the GRI. We can't argue with this as a free market principle, Lossau told FTW. But how can they do a GRI one month, then add a peak season surcharge of the same amount a month later?
And, although the lines justify the peak season surcharge as following the same supply/demand principles as increased peak season airfares, she also argues against the surcharge concept.
Those who import all year for remanufacture/re-export can't possibly add a surcharge to their prices to overseas clients, said Lossau. No way it comes from anywhere but off their bottom lines.
Lossau also mounts an argument against the lines' claim that rates now are lower in real terms than five years ago.
I challenge the lady, said one shipping line spokesman, to show me any of her prices that are less than five years ago.
Lossau accepts that - allowing for inflation and other cost-increasing pressures pushing up prices.
But, she said, this is the lines talking in US dollars. Convert rates to rands, and a different story emerges.
One example she cites - although a bit of a worst case scenario - are the rates being paid in early 1996 for hazardous goods imported from China. This was US$1 500 then, and is US$1 800 now.
Even allowing for US inflation, that is a real increase, Lossau told FTW. Convert them to rands - US$1 500 x R4.29/$1 in 1996 = R6 435; US$1 800 x R6.60 (exchange rate now)
= R11 880 - and again a real increase appears.
Not fair, said FTW's line spokesman. First, hazardous goods are amongst the most costly freight rates, and Mainland China doesn't fall into the direct ambit of the Far East conferences.
Also, he said, our costs are in US dollars; we price in US dollars; and our profit/loss is measured in US dollars.
The shipping lines are not responsible for exchange rate fluctuations, and we make no profit out of them.
The justification for the peak season surcharge is also strong, he added. Demand on the eastbound run bumps up dramatically from June, he told FTW. So much so that the Safari conference, for example, is having to put on extra ships to cope.
He also highlights the lines' promptness at reducing rates when situations change.
The bunker surcharge, for example, has just been reduced in line with falling international oil prices. For the Europe-Southern Africa conference, for example, this will see a reduction in the surcharge from May 1 - from 13.13% to 10.53% (See April 21 issue of FTW).
The lines do reduce the bunker surcharges as soon as it's feasible, said the shipping line source.