Shipping dependent firms ailing over high freight costs

The rising costs of shipping services are becoming too heavy for domestic industries, which import raw materials and spare parts to keep afloat.

Data gathered from the Baltik-Handi Max Index (BHMI) showed prices have started to surge from June this year from about $13,000 per day to $22,000 per day this month. BHMI reflects the shipping services costs of handy-max size vessels with loading capacity of 40,000 DWAT to 53,000 DWAT.

Rates of bigger Panamax vessels on the other hand, with loading capacity of 60,000 DWAT to 80,000 DWAT, have gone up from $12,000 per day in June to a high of $48,000 per day this month.

With the shipping costs reaching historic high levels, domestic industries are pratically held hostage, a source from the local vessel agent company said. Some of the industries that import raw materials are power-generating plants, manufacturing plants and big agro-industries companies.

Shipping costs have risen to historic level partly because of a surge in demand for ships that would bring raw materials like iron ores to China where construction activities is at its peak, aside from the high volume of cargoes going to Europe and America. the increasing fuel costs also has a ripple effect to the rates of shipping services.

Because of the strong demand for cargo vessels, the cost of shipping services has become more expensive than some raw materials being imported by local industries. "Shipping in natural gypsum, a raw material commonly used by cement companies, for instance, is even costlier than the material itself," the source said.

Even state-owned National Power Corp. (Napocor), which imports coal from China, was alarmed by the surge in the shipping costs last month as its supplier has asked to double its freight cost last November to $12 per metric ton from $5 per metric ton in June which would mean an increase of P175 million in freight payments for its previously committed cargo.