Shipping companies are prepared to raise freight rates by 6-10 per cent in the third quarter to cope with soaring oil prices, according to the Thai National Shippers' Council.

"Shipping lines will meet in June to consider an adjustment in freight rates as their operating costs have increased on the back of higher fuel prices," said Techa Boonyachai, deputy secretary-general of the council.

"This would be in addition to the fuel surcharges that the lines collect from exporters, based on the fuel prices at a particular time," he said.

The higher rates would undoubtedly raise costs for exporters who have also suffered from higher fuel bills as well as the appreciation of the baht against the US dollar, which has made Thai products more expensive.

According to Techa, shipping accounts for 40-60 per cent of exporters' expenses. If shipping lines raise freight rates that would further increase exporters' operating costs.

However, he noted that the increase would be small and should not affect exporters significantly and that the adjustment would be in line with the supply and demand of shipping services.

"Right now the number of ships has increased while the volume of shipments is tending to fall. The freight rates should not be raised too much," he said.

Thai exporters have cried foul over the rising costs as they cannot raise prices. If they did, trade partners would switch orders to rivals who have weaker currencies.

Techa added that exporters from over 10 Asian countries including Thailand would meet in Indonesia next month to pressure shipping lines to reduce the in-port shipment handling fees which are collected from exporters.

"Exporters from many countries want the lines to reduce the cost to reduce exporters' operating expenses in the high-oil-price environment," he said.

In Hong Kong, the in-port shipment-handling cost is Bt15,000 per container while the cost in Thailand is still maintained at about Bt2,600 per container. The cost in Thailand was fixed for eight years before oil prices started to skyrocket last year.

"The results from the meeting will be discussed with shipping lines," Techa said.

He added that it was important that exporters focus more on improving production efficiency and strengthen their unity and bargaining power.

Techa noted that persistently high oil prices would raise logistics costs and the government should speed up national logistics strategies. The proposed strategies were withdrawn from the Cabinet agenda on May 17 as the acting government wanted to avoid making a decision on a huge investment project like this.

"If the acting government does not want to take a position on such a huge investment, it could spin off some projects which need cooperation from the public and private sectors and which require low investment. It could start with the appointment of a person to take full responsibility for the development," he said.

Meanwhile, while the government kicks off the development, the private sector should adjust by revising internal logistics systems. "They could outsource their logistics," he said. At a later stage, exporters in the same industry should unite to create a single logistics network to save fuel costs, Techa said.

Watcharapong Thongrung

The Nation