WTSA Hiking Fuel Surcharges

Container lines in the Westbound Transpacific Stabilization Agreement has announced plans to assess bunker fuel surcharges separately from base freight rates for recovered fiber, and allow those surcharges to float, adjusted on a regular basis to reflect fluctuations in world bunker fuel prices.

Recovered fiber contracts have typically included provisions mitigating the bunker surcharge and folding it into an all-inclusive rate, owing partly to the low shipment value and unique price structure of U.S. recovered fiber shipments to Asia.

WTSA lines are taking a first step with respect to the leading commodity in the trade in terms of volume," said Agreement executive administrator Brian Conrad. "Wastepaper rates are low from the outset, and downward pressure on rates over time has eroded fuel cost recovery buried within the rates. At the volumes wastepaper moves, it is nowhere near making an adequate revenue contribution as fuel costs have risen 55 percent since the beginning of 2007 alone."

The WTSA reported that more than 233,000 40-foot containers of recovered fiber moved from the U.S. to Asia in the first half of 2007, accounting for 18.3 percent of the total westbound market.

WTSA stressed that setting bunker surcharges separately from base rates does not mean lines intend to offset the new surcharges with base rate concessions, nor do the new surcharges preclude separate actions on rates during 2007 as market conditions dictate.

WTSA is a voluntary discussion and research forum of 10 major ocean and intermodal container shipping lines serving the trade from ports and inland points in the U.S. to destinations throughout Asia. Members of the agreement include APL, Ltd., Hyundai Merchant Marine Co., Ltd., COSCO Container Lines, Ltd., Kawasaki Kisen Kaisha, Ltd. (K Line), Evergreen Line, Nippon Yusen Kaisha, Hanjin Shipping Co., Ltd., Orient Overseas Container Line, Ltd., Hapag Lloyd AG, and Yangming Marine Transport Corp.