Crude Oil, Marine Fuel Prices Hit Record Levels in Pacific

Rising global demand and potential for sudden supply disruptions, suggests a long-term trend that container lines say must be addressed in upcoming contract round.


Oakland, CA / April 22, 2008 – Crude oil prices topped an unprecedented $117 per barrel this week, reflecting sustained industrial demand worldwide, a weak dollar and supply disruptions that included pipeline attacks in Nigeria and a Japanese tanker hit by a rocket off the Yemen coast. All of these factors were compounded by refinery capacity and distribution constraints to drive up marine bunker fuel prices to a record average of $552 per ton – up $26 per ton since the end of March.

Transpacific container lines, in the midst of negotiating a new round of 12-month service contracts with customers by May 1, are under tremendous cost pressure to restore full, floating bunker charges. “There is no question that the negotiating concessions made on surcharges in the past, when it may have mattered less, are coming back to haunt carriers in the transpacific trade,” said TSA chairman Ronald D. Widdows. “We are in an entirely new market environment of $100-plus oil for the foreseeable future, and to the extent we are not collecting the full charge, adjusted monthly with price fluctuations, we are losing money.”

Widdows reiterated that TSA’s surcharge calculation formula accurately reflects cumulative increases in fuel costs over a five-year period, which have only sporadically been collected. More than half of the surcharge reflects price increases since the beginning of 2007 alone.

TSA is a research and discussion forum of major container shipping lines serving the trade from Asia to ports and inland points in the U.S.

Members include:
APL, Ltd.
China Shipping Container lines
CMA-CGM
COSCO Container Lines, Ltd.

Evergreen Line
Hanjin Shipping Co., Ltd.

Hapag Lloyd AG

Hyundai Merchant Marine Co., Ltd.

Kawasaki Ksen Kaisha, Ltd. (K Line)

Mediterranean Shipping Co.

Mitsui O.S.K. Lines, Ltd.
Nippon Yusen Kaisha (N.Y.K. Line)
Orient Overseas Container Line, Inc.
Yangming Marine Transport Corp.

Zim Integrated Shippnig Services


Contact: Niels Erich
T: (415) 379-1414
F: (415) 358-4540
E: n.erich@comcast.net

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