Higher freight rates from 04/00

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Higher freight rates from April 18, 2000

Extracted from the Star, 18 April, 2000

Freight rates from Asia and the Far East will increase from April 1 2000 as shipping lines embark on another round of rate restoration.

Besides this, emergency bunker surcharges (EBS) for the South East Asia-Australia trade and services to and from New Zealand will also be imposed come April 1.

In recent press notices, the Mediterranean Far East Conference (Medfec) and Asia Westbound Rate Agreement (Awra) announced a rate hike of at least US$150 per TEU.

Medfec said following a meeting with its principals, a rate restoration of minimum US$150 for a 20-footer and US$300 for a 40-footer in the Westbound trade will be implemented.

The conference added the increase for the Eastbound trade will be the same amount for a 20-footer whilst it will be a minimum of US$200 for a 40-footer.

Similarly Awra has also notified the Asia to North Europe trade that as part of a rate restoration programme for this year, rates would be increased by a minimum of US$150 per TEU.

The restoration is also applicable for the Asia to Gulf of Aden and Red Sea Ports (Gars)

In separate notices, lines further announced that with the continuing extreme increases in bunker prices, a revision of the current EBS to US$100 per TEU and US$200 per FEU will be imposed for vessels sailing from all ports in Malaysia, Singapore, Thailand and Indonesia to Australia.

Several lines have also unanimously agreed to revise EBS for vessels sailing between all ports in New Zealand, and Singapore, Malaysia, Indonesia, Vietnam, Middle East, Africa, India, Pakistan, Bangladesh and Sri Lanka for cargo to and from these areas.

The revision is to US$100 per TEU, US$200 per FEU and US35 per revenue ton for break-bulk / LCL cargo.

Further, carriers in the Far East / West Africa trade will adjust the emergency bunker additional (EBA) to US$100 per TEU.

The lines said they reserved the right to revise the EBA further at short notice.

International Shipowners Association of Malaysia chairman Abdul Latif Abdullah said lines were on a ‘catch-up’ mode to restore rates to levels they previously obtained.

“This is an ongoing exercise imposed on a staggered basis to get rates up to what it was prior to 1993,” he said, adding it was likely that another round of restoration will be implemented in the later part of the year.

A senior shipping lien officer said the rate restoration exercise would actually ensure that Malaysian exporters were secured of sufficient space onboard due to the space constraints experienced currently.

He said it was important that rates out of Malaysia remained competitive for lines to continue calling at local ports.

“Otherwise, lines won’t want to allocate space for Malaysian cargo as we compete with rates from Indonesia and Thailand, which are traditionally higher to Europe, US and Intra-Asia destinations.

“Lines must be able to load profitable cargo from a particular port which it calls directly. Furthermore, freight rates for the bulk of exports from Malaysia such as furniture, garments, electrical gods and toys is not even 5% of the total value of a consignment,” the officer explained.

He added that the EBS was imposed because the price of fuel had risen by 40% more than what lines had initially budgeted for.

“For example, bunker at Singapore last year cost US$96 per ton, whereas it is now US$181 per ton.

“Lines will have to recover the additional cost which will eventually have to be passed on to either the shipper or buyer, depending on the terms of sale,” the officer said.

He added that bunker was a key cost of operating a vessel.

A managing director from a shipping line said the EBS would help lines offset rising fuel rise which had been steadily increasing since 1998.

“Bunker is part of the formula to calculate total freighting cost, together with terminal handling charges, ocean freight and the currency adjustment factor.”

He added that although the first quarter of the year was seasonally slow, this was not the case now and ships out of Malaysia were either full or getting high utilisation.

“It also boils down to economics whereby when demand is high, there will not be enough space onboard and as a result prices go up.

“Local exporters should realize that restoration is throughout the region and not confined only to Malaysia,” he said.

Federation of Malaysian Manufacturers Logistics Committee chairman Manuel Gomez described the additional charges as “bullying of exporters and importers”.

“We are talking with the Ministry of International Trade and Industry and Transport Ministry to see how we can solve this unilateral practices,” he said.

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