Logistics firms increase fuel surcharges

Some shippers reconsider Asian sourcing plans

by Dave Hannon -- Purchasing, 6/18/2008 12:10:00 PM

Northwest Airlines’ Cargo division is increasing its fuel surcharges both domestically and internationally. Domestic shipments will now include a surcharge of 48¢/lb up 4¢.

NWA is increasing the fuel surcharge by 10¢/kg for its longest routes from the U.S. to Asia and India. “In an environment of unprecedented fuel prices, adjusting fuel surcharges to more accurately reflect distance will better align the surcharges collected with the actual expense incurred to transport the freight,” said Tom Bach, President-NWA Cargo. For more details see the airline’s surcharge information page.

Airlines across Asia increase fuel surcharges on intra-Asian cargo and shipments going across the Pacific. Singapore Airlines also said it will raise fuel surcharges for the third time this year to as much as $180 per shipment from the U.S. to Asia. According to Reuters, South Korea’s transportation ministry will allow domestic airlines to raise fuel surcharges from July to cushion record-high fuel costs.

Also this week, ocean carrier Matson Navigation said it has raised its fuel surcharge for shipments in the Pacific from 33.75% to 38.25%. Perhaps the only good news for trans-Pacific shippers is the dramatic plunge of bulk freight rates on the Baltic Exchange the past week.

The dramatically increased shipping costs across the Pacific have some shippers rethinking their global sourcing strategies. According to a story in the Wall Street Journal, Edward Zaninelli, vice president of trans-Pacific westbound trade at Orient Overseas Container Lines in San Ramon, Calif., a major shipping line, says he's heard from customers who are moving production back to the U.S., including a maker of steel pans for car engines. The Journal also says Emerson, the St. Louis-based maker of electrical equipment, recently shifted some production of items such as appliance motors from Asia to Mexico and the U.S., in part to offset rising transportation costs by being closer to customers in North America.

WHAT DO YOU THINK?

Have fuel and shipping costs in the Pacific reached the point where you are reconsidering your sourcing strategies? Post a comment on this page.