Surcharges to drop along with fuel price

With the price of diesel due to fall by around 50 cents per litre on December 3, according to the latest calculations by the department of energy, road transporters’ fuel surcharges should also take a drop. But the question remains about whether they do reduce these surcharges when the price goes down. That’s a sure thing, according to Garth Bolton, joint CEO of Cargo Carriers and a director of the Road Freight Association (RFA), because eagle eyes amongst his clients will certainly focus on whether he does or not. “We pass on both increases and decreases to our clients,” he said. “They are disgruntled by increases and watch us closely, ensuring they get their decreases. “To maintain our relationships we make sure we pass on the decreases.” It’s a very transparent process, according to Kevin Martin, chairman of the Durban Harbour Carrier’s Association (DHCA). The price of fuel is 40% of a trucker’s operating cost. So 40% of the amount of a fuel price increase can be added to the surcharge. And, similarly, 40% of any decrease can be deducted from it. “When the fuel price increases, the surcharge goes up,” Martin said, “and when the price drops, so does the surcharge. For 99% of my industry this statement will hold true.” But, he also pointed out that there was a difference between the long-haul and the short-haul truckers. “The long-distance transporters have to have a surcharge because of the distances they cover. For lots of short-haul transporters that is not necessarily the case. So other factors, like competition, may dictate whether or not a surcharge is applied.” Nicholas de Canha, MD of Imperial Fleet Management, agreed. “It really depends on the contract that one is in,” he told FTW. The first is the standard retail contract. “Here,” he said, “the consumer does not have an explicit contract with an individual airline or DHL etc. Therefore the extent to which these surcharges are levied and removed, or not, depends on the level of competition.” But, for a business contract, it often has a fuel indexation, according to De Canha. “International freight (especially seafreight) has an index linking it to the oil price, the “bunker adjustment factor (baf). And, in road logistics, this is also common with major contracts. Therefore in mining typically, the cost per kilometre (cpk) is linked to the fuel price. “When there are smaller contracts in place with multiple parties, the situation is more similar to the retail situation, and the market determines if the surcharge occurs and if it is removed.” And the standard index for truckers in SA, according to Martin, is the Steel and Engineering Industries Federation of SA (Seifsa) Index. “Most big transporters adjust prices up and down every month to match the index,” he said. INSERT & CAPTION Clients are disgruntled by increases and watch us closely, ensuring they get their decreases. – Garth Bolton