Shipping costs may rise by as much as 25%, industry group warns

Shipping costs may rise by as much as 25%, industry group warns
Arjay L. Balinbin March 8, 2022 https://www.bworldonline.com/shipping-costs-may-rise-by-as-much-as-25-in...

SHIPPING COSTS may rise as much as 25% as global oil prices continue to skyrocket amid the Ukraine-Russia conflict, according to an industry group.

Philippine Liner Shipping Association (PLSA) President Mark Matthew F. Parco said that fuel is usually 40% to 50% of vessel cost.

With Brent crude now at $130 per barrel, up from $80 per barrel at the start of the year, the PLSA expects that other operating expenses, aside from the vessel cost, will also be affected.

“Higher energy prices will affect other costs such as drydocking, spare parts, trucking, etc.,” Mr. Parco said during a House committee hearing on the fuel crisis on Monday.

“We expect approximately 15%-25% increase in shipping cost,” he added.

The industry is seeking fuel subsidies, the removal of excise tax on oil, and reduction in charges imposed by regulating agencies to soften the impact of the rising fuel prices on shipping costs.

“We join the other transport sectors for a fuel subsidy, probably, or the suspension of the excise tax,” Philippine Interisland Shipping Association Executive Director Pedro G. Aguilar said during the same House committee hearing on fuel crisis on Monday.

Mr. Aguilar said that removing the excise tax on fuel will be a relief for the industry. “The impact of the excise tax on cargo ships is an increase of P400 to P500 per 20-foot container depending on the fuel consumption of the vessel and the port of destination of the cargo,” he said.

“For passenger ships, while we don’t have data right now, I’m pretty sure ship owners and operators of RORO (roll-on, roll-off vessels) have made their own increase just to recover the cost of the excise tax,” he added.

As relief for the shipping industry suffering from high fuel prices, Mr. Aguilar said they are seeking a “substantial” reduction in the fees and charges imposed by the regulatory agencies such as the Philippine Ports Authority (PPA).

“We have been subjected to so many increases in port charges by the PPA,” he added.

Sought for comment, Chelsea Logistics and Infrastructure Holdings Corp. President and Chief Executive Officer Chryss Alfonsus V. Damuy said that “increasing prices will also mean increase in costs to operate ships and even on our logistics business.”

“The industry intends to pass these costs to shippers as these are too huge to absorb. The passing (of costs) to shippers may not be outright as it entails notices and effectivity, a certain period, ship operators absorb the costs for a certain period of time,” he said via WhatsApp messenger.

PPA General Manager Jay Daniel R. Santiago has yet to respond to a request for comment as of press time.

At the same time, Chelsea Logistics’ Mr. Damuy said there are concerns over the stability of oil supply considering the recent developments in the Ukraine-Russia war.

“It is very tough that it will not be passed on as the industry is yet to recover from the pandemic. To soften the impact, I am not sure if a subsidy to shipping is feasible being one of the prime movers of the economy considering the Philippines being an archipelago,” Mr. Damuy added.

In a phone interview, Philippine Exporters Confederation, Inc. President Sergio R. Ortiz-Luis, Jr. said the possible increase in shipping cost will negatively affect exporters’ competitiveness.

“There are already so many charges. There are also so many problems, including the shortage of vessels and all the charges that may increase, so they are already beginning to feel that they are losing their competitiveness,” he noted.

“You can pass it on to consumers, but there is a certain point where you cannot pass it on because our consumers have various options where they can buy goods.”