TSA Members revise low-sulfur fuel charge

Asia-U.S. container shipping lines in the Transpacific Stabilization Agreement (TSA) have revised their recommended low-sulfur fuel charge to recover the added cost. According to TSA the container lines are facing an average USD 365 per ton low-sulfur fuel price differential at the beginning of 2015 as environmental rules mandate a shift to cleaner marine gas oil (MGO) within North American coastal waters. Application of the new formula will take
effect January 1, 2015. TSA said that shippers with cargo moving from Asia to the U.S. can expect initial charges of USD 67 and USD 53 per 40-foot container (FEU) for the East and West Coasts respectively, versus USD 17 and USD 16 at present. Going forward, the charge will be adjusted quarterly based on a 13-week average of weekly prices. Charges for 20-foot containers (TEU) will be assessed at 90% of FEU levels.

 In September TSA announced plans to establish a new formula in conjunction with its 2015 revenue and cost recovery program. Modifications reflect both the higher per-ton MGO fuel cost differential versus low-sulfur fuel currently in use, and revised fleet characteristics such as vessel size, speed and effective capacity; MGO consumption rates; sailing time within the coastal zone, and other factors.

“In the absence of firm loading prices for MGO in Asia, the new formula will base its East and West Coast charges on weekly loading prices for New York and Los Angeles, respectively, as posted by Bunkerworld,” the association said. “As in 2012 when we first established the component, carriers are again exposed to a sudden, dramatic increase in fuel costs that they cannot possibly absorb,” explained TSA executive administrator Brian Conrad.

 “Serious questions remain as to whether an overnight surge in demand for a relatively scarce fuel will be fully met and what a ramp-up on this scale will mean initially for prices. Recent estimates suggest added annual cost per carrier in the hundreds of millions of dollars, so it is critical in the current environment that lines act quickly to mitigate such a large impact.”