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Change That Impacts Ocean Shipping Lane Costs

[ July 5, 2017   //   ]

The Transpacific Stabilization Agreement (TSA), a collaborative forum for ocean container shipping lines serving the trade lane between Asia and North America, has discontinued publishing its guideline formula for calculating fuel costs.

Beginning July 1, 2017, the TSA will offer only a single weekly average fuel price for the six million 40-foot containers that travel the lane annually. The impending change has caused various TSA members to file General Rate Increases (GRIs) to take effect on July 1, 2017.

“Shippers need a more accurate method for determining actual market fuel costs within the world’s second largest trade lane,” Daniel Cullen, vice president of advisory services at Breakthrough®Fuel, said. He explains, “The TSA West Coast calculated costs were an average across a trade lane and did not match market dynamics of benchmark port averages. The TSA’s formula lagged the market as prices changed over time.”

Due to changing market conditions and cost structures, the TSA determined it unrealistic to rely on a single guideline formula to calculate fuel costs and will begin to post weekly average fuel prices as a resource. The TSA will not continue to offer a benchmark formula that incorporates trade lane consumption characteristics such as average vessel size and transit time.

Energy management company, Breakthrough®Fuel, offers a Marine Fuel Management solution to create transparency and consistency in fuel reimbursement practices such as these. The company’s precise fuel cost calculations are built upon knowledge of vessel efficiencies, trade lane distance and geography, transaction timing, taxes and fuel prices.

Breakthrough®Fuel offers an additional analysis of the change in the June 2017 edition of the Breakthrough® Global Advisor Pulse, located on their website, www.breakthroughfuel.com, in the Knowledge Center section.

 

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