In recent weeks, the world’s leading liner shipping companies have announced the introduction of “emergency” bunker surcharges in response to rising fuel costs, almost in unison. In most cases, these emergency surcharges are imposed on top of existing bunker surcharges.
Chris Welsh, Secretary General of the Global Shippers’ Forum (GSF) believes this move is an indictment on the liner shipping industry that, a decade since the abolition of the liner conference system in October 2008, the container industry is still using conference-style pricing methods to impose surcharges on its customers. GSF is adamant that few transport operators in other transport sectors would risk imposing such short-notice emergency surcharges because of the likely strong reaction from customers, including the loss of business.
“Container ship operators need to ‘fess-up’ by taking responsibility and greater control of their costs,” he says, “rather than announcing vaguely explained short-notice unrecoverable surcharge costs on customers.
“It is incumbent on container carriers to provide their customers with full transparency regarding bunker surcharge costs, and to explain why an emergency surcharge is warranted on top of existing bunker surcharge mechanisms. Shippers will also want to know what steps have been taken to mitigate the impacts of rising fuel prices, including the impacts of fuel hedging arrangements which are designed to manage the risks associated with the single largest cost component of operating container ships.
“The imposition of emergency surcharges has no place in a modern liner shipping market where costs and prices should be mutually agreed between customers and suppliers, preferably in mutually agreed service contracts,” he continues. “Such arrangements enable the parties to build long term business partnerships, as well as providing clarity on the terms and conditions for the services provided and for appropriate remuneration.
“The use of emergency surcharges is a none too subtle attempt to impose non-negotiable charges on customers. The liner industry needs to employ more appropriate pricing arrangements, in conjunction with its customers, if it is serious about developing partnership approaches and improving individual customer-supplier relationships.”