Freight fees expected to climb further

SHIPPING COMPANIES in the Philippines are likely to raise freight fees even more to cushion the impact of rising fuel costs on their operations, analysts said.

“There is a limit to cutting cost. The lines will have no choice but to pass on the cost to the cargo owners,” Philippine Liner Shipping Association (PLSA) President Mark Matthew F. Parco told BusinessWorld in a phone message on May 19.

Asked if freight fees are projected to increase further, he responded, “Yes, not only fuel but everything else is rising such as forex, parts, wages, etc.”

“Certainly, there will be another round. Maybe similar quantum,” he added, noting that shipping lines “face the same problems.”

Freight fees have already gone up by an average of 25% this year, reflecting the impact of the spike in oil prices.

As of May 17, year-to-date adjustments are at a net increase of P21.60/ liter for gasoline, P31.40/liter for diesel and P27.65/liter for kerosene.

Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said higher costs are widely expected to be passed on to passengers and cargo customers.

“(The) ability to pass on higher costs would be a function of competition or even potential demand destruction or lower demand due to higher shipping prices/fees that lead to lower demand,” he said in an e-mailed reply to questions.

Cost-cutting measures would be the firms’ “second layer of defense,” Mr. Ricafort said, adding that they may need to adopt better technologies to increase operational efficiency and prevent operating losses.

“Higher costs, largely due to higher oil/energy/fuel prices, which comprise a large chunk of the cost structure of shipping companies would lead to either higher prices (but could be mitigated/limited by competition) and/or cost-cutting measures to make up for the narrower profit margins,” he said.

The International Monetary Fund has said the rise in global shipping costs would likely cause quicker inflation in import-dependent economies until the end of the year.

The Philippines is a net oil importing country. Inflation quickened to a threeyear high of 4.9% in April, the highest in more than three years as food and energy prices soared,

“Main culprit remains to be coronavirus and the war in Ukraine. Insofar as COVID is concerned, it’s still biting.