Ocean freight costs rising again this summer
By Thomas Russell -- Furniture Today, July 4, 2005
High Point — Many furniture importers will soon see another increase in shipping costs.
On July 1, major steamship carriers plan to raise the Bunker Adjustment Factor, a fuel surcharge. Logistics service provider Global Link Logistics has notified its customers that the increase for each 40-foot container will be between $135 and $150.
That would bring the total Bunker Adjustment Factor rate to its highest level in recent memory. For each regular 40-foot container, the rate would rise to $410, a 49% increase. For a 40-foot high-cube container, the rate would rise 48% to $460.
BAF rates are adjusted quarterly to reflect changes in fuel prices.
"It may not stay at this level," said Chad Rosenberg, CEO of Global Link Logistics. "It's all based on fuel calculations. It just depends on what happens with the price of fuel."
In the short term, shipping cost hikes could squeeze profit margins. For an importer bringing in 50 high-cube containers a month, the surcharge could add $7,500 in costs.
The increase falls on top of the new container rates that took effect after May 1. Those rates rose $100 per container for shipments to the West Coast from Asia and as much as $300 for containers traveling inland via rail. All-water shipments through the Panama Canal rose between $300 and $400 per container.
"It is going to happen," said Karim Azar, a manager of sales and planning for Globe Express Services, a logistics management and consulting firm based in Charlotte, N.C. "Usually it depends on the shipping line and how much it costs them in bunker fuel. Every now and then they add it, and we can't refuse it because it is part of their tariff."
Shippers also are expected to impose a peak-season surcharge from June 15 through October. For each 40-foot regular or high-cube container, those surcharges range from $200 and $225 from Asia to the West Coast and points inland. The surcharge for the all-water rate to the East Coast is between $300 and $350 per container.
In many cases, the BAF is non-negotiable and affects all shipments that sail on or after July 1. In some cases, however, importers have already built the rate into their yearly contract.
One company with such a contract is Thomasville Furniture Inds., which expects to import 5,000 containers from Asia over the next 12 months. Richard Garrity, vice president of supply chain management, said the arrangement allows Thomasville and other large importers to better budget for shipping costs.
