Author Archives: just2bruce

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Liner customers “bewildered” by new low-sulfur fuel charges – FreightWaves

Ocean carriers are confusing their customers again.  This time, it’s the low-sulphur fuel charges which are being put in place before the requirement to use it is mandated.   Each carrier has different charges, with different bases.  The result is confusion about the impact.  Some charges are being billed as “sustainability” charges. That means different things to different customers.  Most of them translate to “higher cost”.  Carriers are using various international indices to measure the changes in contracts, which may or may not relate to the actual extra cost.  And some ships are being fit to use LNG rather than the low-sulfur marine fuel, which is a whole different calculation.

Here’s an example from the article of a typical letter.

Evergreen Lo-sulfur fuel memo

The article finally gets to the bottom line.  Customers are worried that the new charges will be used by the carriers as profit centers rather than just recovering their costs.  the rate rises might go into carriers’ pockets rather than fund sustainability or simple costs.  It’s a reasonable worry, given that fuel surcharges have been used that way in the past by the carriers. Everyone knows the carriers are operating at very thin margins, particularly in the container trade.

It seems like more public relations needs to be done by carriers.  They also need to pay attention to the cost allocation part.  How can they reassure shippers that they won’t be overcharging them?  Cost allocation issues surround many business decisions, and need to be thought through.

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via Liner customers “bewildered” by new low-sulfur fuel charges – FreightWaves

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Posted on October 2, 2019 in Logistics, Ports, Shipping, Supply Chains, Sustainability

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New index to improve liner reliability

 mentions that the Shanghai Shipping Exchange (SSE) and Cargosmart are defining a new index of carrier reliability.   Current reliability is around 80%. That means 1 in 5 ships are not arriving on time.

A good reliability index should prove useful to shippers trying to choose a carrier for their cargo.  If you need it on time, you need to pick a high reliability carrier.  Forwarders and NVOOCs, who buy blocks of slots on carriers’ ships for resale, will be moved to choose carriers who won’t cancel and who won’t delay the ships.  The index should also be useful to them.

I’ve been complaining for a while that carriers are not addressing the problem of erratic timing of shipments, and it’s a serious customer service issue for them. It’s time they started addressing it.  True, the larger ships made it more of a problem, but that is of their own doing. Customer service improvement costs money, but you make it up by holding onto good customers longer term.

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via Shippers welcome plan for new index to improve liner reliability – The Loadstar

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Posted on September 6, 2019 in Logistics, Service Management, Shipping, Supply Chains

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Commentary: Cato’s Jones Act numbers wrong

John McCown, a former shipping company CEO and transport hedge fund executive, debunks the faulty calculations in the Cato Institute’s analysis of the Jones Act as it applies to Puerto Rico.

Most container traffic from the US flows from Jacksonville FL to Puerto Rico. Containers headed to Puerto Rico must be carried in US-flagged hulls, due to the cabotage restrictions of the Jones Act.

It appears Cato Institute researchers’ figures are patently wrong, their methodology is flawed, and they have excluded several factors that would affect the Puerto Rico – US container trade link.  Cato researchers came up with an 88% decline in the cost of shipping a container by their flawed technique. But Mr McCown’s spreadsheet says it is more like 10-12%, an amount that is hardly worth junking the Jones Act.

The purpose of the Jones Act is to maintain a capable US maritime segment. It embraces, for instance, container shipping between US ports, US shipbuilding, and US seamen and training, along with the stricter requirements for seamen’s well-being that a US flag puts into effect.

The Cato Institute seems to have aligned itself with some radical allies of the sitting US President. We don’t see why they would be so eager to cook the books on this issue.  And we don’t understand why they insist on repeating their false conclusions even when they have been called into question by a serious critic, on fairly easily ascertainable facts.

It seems as though Cato is falling prey to the fake news fad, and won’t shut their collective mug when they are found out.  It’s a good way to lose everyone’s respect.

 

   via Commentary: Cato’s Jones Act numbers wrong

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Posted on July 27, 2019 in Labor Economics, Logistics, Shipping, Strategy, Supply Chains

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