Transport firms and customers breathe easy as oil prices fall

News was prepared under the information support of Online Daily Newspaper on Hellenic and international Shipping "Hellenic Shipping News".

30 Sep 2008

Shipping companies, airlines and transport operators breathed a collective sigh of relief when the price of oil fell to $100 a barrel after almost touching $150 a few months ago. The bunker adjustment factor (BAF) and fuel surcharges have come down substantially in line with crude prices. Maersk Line plans to reduce the BAF by five to 10 per cent for the next quarter from October 1 following the sharp decline. Other shipping companies, air

and sea cargo operators, courier firms and transport and logistic companies that were hit hard by the hike are expected to follow suit.
"For the first time in the last six months Maersk has announced a reduction in the BAF," said Jay Suresh, Manager of AST International Shipping Services.
"The reduction will benefit customers who make fresh bookings from October 1. Following the sharp reduction in crude prices airlines will also reduce fuel surcharges for cargo.
"If the freight charge for a 20ft container was $700 [Dh2,571] earlier it will come down to $620 per unit. However companies that have already booked containers will not benefit from the reduced fuel surcharge."
Maersk introduced a new formula for its floating BAF in July to recover the additional costs created by increasing bunker prices. Bunker prices have almost tripled in the last three years and bunker costs constitute nearly half of total vessel costs – up from 20 per cent 10 years ago. The BAF for dry and refrigerated containers on the transatlantic eastbound route was $115 per 20ft container and $230 for a 40ft container in July. The corresponding rate for westbound cargo was $140 and $280, respectively. These quarterly rates will now be revised downwards.
Retailers Enoc, Eppco and Emarat have cut diesel prices by Dh0.50 a gallon for a seventh time in less than two months, and this will benefit transport companies that carry containers and bulk cargo for shipping lines. The diesel price in Dubai has fallen to Dh15.75 per gallon compared to Dh19.25 previously, reducing the burden on transport operators.
Nanoo Viswanathan, General Manager of Naswan Land Transport, said: "The diesel price in Dubai went up from Dh8.35 per gallon in January 2007 to Dh19.25 in June 2008. It is a great relief that the price has gradually came down. In Dubai a truck needs 10 gallons per day to cover about 120km.
But he said the lower diesel price might not result in an immediate reduction in truck charges. "When the diesel price was Dh19.25 we did not increase truck charges," he said. "All the transport companies that took a big hit feel relieved now as the diesel price has been reduced."
Irfan Razak, Managing Director of Advanced Cargo and Shipping, said the volume of cargo was falling because of the global financial turmoil, which was affecting the commodity market.
"The volume of re-exports from Dubai will also be affected by the financial crisis," he said. "The reduced oil price is a great relief to the shipping, transport and logistic firms, but fuel prices are just one factor affecting the cost of imports and exports.
"A new port congestion charge of $25 per container was introduced by Dubai Port World following the closure of Port Rashid. A lot of vessels are now not getting berths in Jebel Ali and there is congestion caused by increased container movement from Port Rashid to Jebel Ali. A major reason for high transport costs is the heavy traffic in the city and reduced diesel prices alone will not bring down transport costs," he said.
Delays in obtaining berths result in additional charges that are passed on to the end users, increasing the prices.

Source: Business24-7