Shipping cost hike worries businesses

KOTA KINABALU: The eighth day of the Chinese New Year (Feb 1) marked yet another business cost hike which will affect the business community, particularly involving import and export, as all ships are mandated to use low sulphur fuel which is more costly.

The increased cost will be passed on to the consumers of imported items and also affect the prices of export items to overseas markets.

This came about as the International Maritime Organisation (IMO) compels all ocean or sea-going ships to comply with its new 2020 Low Sulphur Regulation by switching to lower sulphur fuels.

For regulation compliance, the sulphur content in the fuel oil must be reduced from 3.50 to 0.50 per cent.

“The aim is to reduce the amount of sulphur oxide emissions for health and environmental benefits globally, including improving air quality and reducing the risks of acidification of the oceans,” the IMO explained.

Consequently, Malaysian shipping companies like MTT Shipping Sdn Bhd impose an “Emergency Bunker Surcharge”, effective Feb 1.

MTT Shipping notified Sabah companies that “in view of the increase in the price of low sulphur content fuel oil, we will introduce an Emergency Bunker Surcharge (EBS). EBS will fluctuate according to monthly VLSFO price and will be           announced by the middle of every month.”

This applies to export from West Malaysia to East Malaysia, Labuan and Brunei; export from East Malaysia, Labuan and Brunei to West Malaysia; export from East Malaysia, Labuan and Brunei to East Malaysia, Labuan and Brunei; and export from West Malaysia to West Malaysia.

The quantum is a flat RM410 for all types of 20-foot containers and a flat RM820 for all types of 40- foot containers for February.

The shipping company said the EBS is payable with ocean freight on prepaid or collect basis as appropriate for all domestic COC (Carrier Own Container) shipments.

Another Malaysian shipping company, Malaysia Shipping Corporation Sdn Bhd, will impose low sulphur surcharge using Bunker Adjustment Factor (BAF) in all quoted ocean freight based on All-In Freight + fixed BAF + Low Sulphur Surcharge from Feb 1 at RM411 per 20-foot container.

“The Low Sulphur Surcharge will be applicable to all container types, including but not limited to General Purposes Units, Reefer Units and all other Special Units such as Open Top Units or Flat Rack Units,” said the company.

For a long time, Sabah companies have complained of high shipping costs for making their export of manufacture items uncompetitive, hence impeding the rate of industrialisation in the State, and blamed the Cabotage Policy that protects monopolistic cartel shipping price fixing among ship owners.

This is also against a background of higher electricity tariffs, water supply costs, labour cost issues, land                    ownership costs and limited domestic market size that the past governments were unable to overcome to help the local business community excel and grow to be world beaters.

This has resulted in many foreign investors being turned off by the high costs of doing business in Sabah.

By: David Thien.

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