Council urges urgent action to curb rising shipping costs

At least seven of the approximately 20 shipping lines that Thai shippers use have announced increases in terminal handling charges (THCs) for dry containers by 62-74 per cent, depending on container size, to be effective from January 1.

Nopporn Thepsithar, chairman of the TNSC, said such dramatic increases would put a huge burden on Thai shippers, as they will have to handle the higher fees.

“The cost of maritime shipments could increase by Bt10 billion a year under the higher terminal handling charges by many logistic companies. It will totally destroy Thai exporters’ competitiveness and obstruct Thai shipment competency,” he said.

He called for government agencies such as the Internal Trade Department under the Commerce Ministry to look into shipping firms’ plans to increase their fees and examine whether these rising prices really reflect operational costs at a time when global fuel prices are dropping.

 Companies that have announced a higher THC include SITC, Hanjin, Yang Ming, Orient Overseas Container Line (OOCL), Evergreen, China Shipping, and Wan Hai. The cost of maritime shipment will increase from Bt2,600 per 20 square feet to Bt4,400, and from Bt3,900 per 40 square feet to Bt6,800, soaring by almost 69 and 75 per cent respectively. For refrigerated containers, the charges will increase by 62-64 per cent.

The TNSC has calculated that the THC increases alone will cost Thai exporters almost Bt7.05 billion per year. In addition, other fees are increasing such as documentation and administration fees, lift on/off charges, and reefer monitoring fees, and if these are included, exporters will need to shoulder up to Bt9.92 billion in additional expenses per annum.

Nopporn said exporters strongly believed that THCs could be increased to recover costs increased by the Port Authority of Thailand, but should not be imposed to recover other losses or to make a profit. The PAT has not increased any tariffs, so there is no reason to increase THCs at this time.

He added that small and medium-sized enterprises would suffer the most from such rising costs as they lack bargaining power. They will face lower profits and incomes, and find it difficult to compete with large enterprises.

Vallop Vitanakorn, vice chairman of the TNSC, said higher logistics costs would damage Thai export competitiveness against such rivals as Indonesia, Malaysia and Vietnam, which have lower shipping costs. About 85 per cent of Thai exporters will be affected, as they trade based on FOB (free on board) price offers, meaning they need to cover the cost of logistics themselves. 

Profit for Thai enterprises will be cut by about 7-12 per cent.

Moreover, he said the loss of export privileges under the European Union’s Generalised System of Preferences next year would also make it more difficult for Thai exporters to compete, and make the country less attractive to new investors as tariff privileges disappear while logistics costs jump.

Besides increasing THCs, shipping firms plan to add even more charges under the Intra-Asia Discussion Agreement. All in all, the government should set out measures to solve the problem urgently, the council says.

The TNSC has formally requested that the Internal Trade Department ask the shipping lines to explain the reasons for their increases and also restrain the announced THC hikes before the effective date early next year. Sea-transport cost adjustments should reflect the decreasing crude-oil prices, it argues. 

Also, it proposes setting up a maritime-transport cost structure in order to make known the actual cost of each export process, and establishing a panel to determine freight and other sea-transport expenses.

Long-term, it wants controls on the cost of maritime service included under the Act on Prices of Goods and Services to prevent unfair price increases.