Domestic shipowners mull rate hike

Domestic shipowners are now considering raising their present passage and freight rates due to the rapid increases in prices of diesel, bunker and the special fuel oil mixtures primarily used by ship operators.

In its letter to the Maritime Industry Authority, the Domestic Shipowners Association (DSA) asked Marina to take urgent action on the losses being suffered by the local shipping industry due to the upswing in fuel prices.

DSA noted that Marina’s rules provide for an automatic fuel adjustment mechanism when the price of fuel increases or decreases by at least 10 percent reckoned from the last implementation of the automatic fuel adjustment mechanism. Marina, which regulates rates for the domestic shipping lines, granted the last automatic fuel adjustment on Oct. 2, 2000.

"Since the start of the year, we have witnessed steady increases in the prices of bunker, diesel and special fuel oil, with these increases implemented at least once every two weeks," the DSA said in a statement. From January 2003 alone, increases in prices of the shipping lines’ fuel mixes ranged from 20 to 25 percent, it added.

The upswing in fuel prices has made it difficult for domestic shipowners to keep up with the spiralling costs of operations, noting that at least 25 to 35 percent of operating cost is fuel.

The DSA also pointed out that the 10 percent benchmark was breached as early as Feb. 4 of this year but in consideration of the riding public, ship owners had held back any increase in rates.

The group said that last March 5 another upward adjustment in fuel prices was implemented, posting a 20.67-percent increase or more than double the 10 percent benchmark provided by the Marina reckoned from Oct. 2, 2000.

The DSA said this translates to an average upward adjustment in shipping rates of 5.92 percent, which under Marina rules is applicable to all interisland vessels.

The DSA added it realizes that a possible increase in passage and freight rates will mean an added burden to the consumers during these very hard times. "We, however, would like to ask for the public’s understanding that the domestic liners have been absorbing significant losses over the past few months due to the fuel increases and higher operational costs. We have tried to delay the increase in rates for as long as we can, but we also have to cover our increased costs," it said.

Prices of diesel, bunker and the special oil mixtures used by the shipping industry posted significant increases during the past seven months beginning August 2002.