APL, in a strong move toward appeasing a primary concern among shippers, will introduce a new fuel surcharge formula on the trans-Pacific trade to reflect the financial impact of slow-steaming.
The new formula, to take effect on July 1, will result in a somewhat lower bunker surcharge than would have been assessed under the previous formula, which was based on a guideline from the Transpacific Stabilization Agreement, APL said on Friday. U.S. retail importers at The Journal of Commerce’s Trans-Pacific Maritime Conference in March said carriers should share the cost savings they realize from slow-steaming, the industrywide practice of reducing vessel speed to reduce fuel consumption, control costs and reduce emissions, by lowering their fuel surcharges.
Under APL’s new formula, the surcharge for a standard 40-foot container shipped from Asia to the U.S. West Coast will drop to $538 from $568 and for a container shipped to the U.S. East Coast to $1,049 from $1,107.
The Singapore-based container carrier subsidiary of Neptune Orient Lines said it developed the new surcharge formula to reflect the cost savings as well as the additional capital costs associated with slow-steaming. As ships reduce speed, additional vessels are generally required to be added to each loop to maintain weekly arrival schedules.
“While not all our services are slow-steaming, many are,” said Bob Sappio, vice president of Pan-American Trades at APL. “Considering the fuel consumption savings from slow-steaming, and the additional asset cost required, we have developed a more transparent approach, the result of which is some reduction in the cost but just as importantly, better visibility for our customers of the impact of slow-steaming.”
APL said its surcharge would continue to rise and fall in line with fuel price fluctuations. But it’s changing the formula used to adjust the surcharge.
For example, until now, every $20-per-ton movement in fuel price resulted in a $20 surcharge adjustment for West Coast cargo. With the new formula, APL said the adjustment would only be $14. For East Coast cargo, the sensitivity is reduced from a $38 surcharge adjustment for every $20 per ton movement in fuel price to a $30 adjustment.