Most local seaweed processing plants run on bunker fuel. Thus, the unabated increase in crude prices in the world market has forced processing plants to spend more for bunker fuel to keep their plants open.
"My company for instance (Shemberg Marketing Corp.) has to contend with more expensive fuel. While we only spent some P4 million monthly for bunker fuel before, now our fuel expenses are at the level of P20 million already," said Dakay.
With higher fuel costs, seaweed processors’ production cost has increased to $3 from $1 per kilo for refined carrageenan, and to $1.50 from $0.50 for semi-refined carrageenan. An added burden to processors is higher freight costs.
The cost of domestic freight is now 10 percent higher while the cost of shipping to its customers like Australia is now $4,500 per container from only $800 last year. Freight costs to the United States also went up to $4,000 from $2,000 per container. As a result, Dakay said seaweed processors are struggling to stay afloat.
"Most seaweed processors use either bunker fuel or diesel in their operations and the rising prices of oil have adverse effects on the entire industry," he said.
Dakay said they have taken steps to mitigate the effects of more expensive fuel. Instead of using bunker fuel, Shemberg has shifted to power generating boilers using either coal or coconut shell.
Still, Dakay, is concerned about the long-term viability of the industry if fuel prices continue to rise.
He said the competitiveness of the processors in the world market will be undermined because they have to pass on the added costs to their buyers.
Shemberg for one is already negotiating for increased prices with its customers.