NEW YORK — Ocean freight carriers are giving apparel importers advance warning about their intent to move aggressively in the next two years to recoup rapidly rising fuel costs.
Freight rate contract negotiations between ocean carriers and importers kick off in March and are typically concluded by May 1. In previous years, the Transpacific Stabilization Agreement (TSA), a conglomerate of 14 shipping lines that negotiates rates from Asian ports, has sought to justify increases by citing factors ranging from growth in trading volume to higher investments in terminal operations and security. Fuel prices have always figured into the negotiations, but the rhetoric from TSA heading into 2008 indicates that fuel will be the primary issue.
In a keynote speech at the Textile & Apparel Importers Trade and Transportation Conference last month, Ron Widdows, chief executive officer of ocean carrier APL and executive committee chairman of the TSA, characterized fuel costs as the “most significant problem” facing the industry.
“The simple story is the cost of fuel has not been recovered in any way, shape or form in the rate and that is an enormous problem in this trade,” he said.
Widdows said the price of a metric ton of bunker fuel has jumped to more than $500 after starting the year at around $250, and compared with less than $75 in 1998. Fuel represents more than 50 percent of ship operating costs. Despite the extreme fluctuation, carriers find themselves locked into contracts that limit their ability to recover those costs.
A statement released by the TSA on Nov. 14 said the gap between what carriers spent on fuel and what they recouped in surcharges totaled more than $5 billion between February 2006 and August 2007. With fuel prices not likely to come down, Widdows told conference attendees that carriers moving goods from Asia were “going to take a heck of a beating serving the U.S. market.”
Carriers are being forced to come up with ways to compensate for the discrepancy. Their solutions could pose problems for importers looking to get their goods on stores shelves in a timely fashion. Boats are being slowed down to conserve on fuel and lines are shifting capacity to the more profitable trade lanes. Widdows noted that such tactics only mitigate the problem.The TSA laid out the rate increases it would be seeking in a statement on Nov. 1. Member lines, which include APL, Hanjin Shipping and Cosco, will look to charge $400 for each standard 40-foot container, known as an FEU, shipped from Asia to the West Coast. A charge of $600 per FEU is sought for containers destined for the East Coast, whether they be moved from West Coast ports by rail or truck or sail through the Panama Canal. A $400 peak season surcharge is also being sought for shipments traveling between June 1 and Oct. 31.
The TSA also said it was looking for “an immediate adjustment” to existing contracts and that all new contracts for 2008 would include a floating bunker surcharge.
Last year, the TSA sought $300 per FEU from Asia to the West Coast, $650 per FEU for moving goods inland by rail or truck from West Coast ports and $500 per FEU for shipping goods to the East Coast through the Panama or Suez Canals. The peak-season surcharge was, again, $400 per FEU. However, the peak season dates ranged from June 15 to Oct. 15.
A grooming moment between @tanfrance and @antoni last night at the The LGBT Community Center Trailblazer Awards honoring Anna Wintour, Ricky Martin and more. See more photos at WWD.com #wwdeye (📷: @lexieblacklock)
“It was a very surreal feeling. It wasn’t like we were in the studio together coming up with it — it’s more like he discovered it and loved it. I didn’t let myself get my hopes up, but then it happened it was very exciting,” said singer-songwriter @nombe on discovering that @pharrell would be using his song, “Cant Catch Me” on his HBO documentary series “Outpost.” The German-born singer — named Noah MacBeth — talked to WWD about feminism, using art as a platform for political expression and personal style. Read more on WWD.com #wwdeye (📷: @jilliansollazzo)
This season, denim is going west – in influence. Brands like @fathersdaughterla (pictured here), @tommyhilfiger Jeans, @levis and more are opting for raw, top-stitching styles. (Styled by @thealexbadia; 📷: @ryanplett)
20-year-old British singer @jorjasmith_ made her debut at Coachella last weekend. We caught up with her and talked about her love for Amy Winehouse, working with Kendrick Lamar on the “Black Panther” album and her fashion philosophy. Read the interview on WWD.com #wwdeye (📷: @katiedaisyla)
Supermodel @helenachristensen teamed up with longtime friend and designer @camillastaerk on a joint @paredeyewear collaboration. The lineup features three styles and 11 offerings, all of which embody a vintage feel. Get all the details on how they celebrated the collab on WWD.com. #wwdaccessories #wwdeye (📷: @slovekinpics)
“It’s a hard industry to keep motivated, as well, so finding different subjects and people is what makes it worth it – when you’re like, oh, I’ve met great people, I feel like I’ve done something good, and I feel proud of having done this,” said French actress Stacy Martin on being grateful for the variety of roles she’s take on. Read @ktauer’s full interview with Martin on her her latest film “Godard Mon Amour.” #wwdeye (📷: @danieldorsa)