Shipping rates rise 15-20% in May

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Domestic shipping rates have risen by about 15-20 per cent since April, according to the Cambodia Logistics Association president. FRESH NEWS

The global rise in fuel prices caused by the Ukraine conflict has pushed shipping prices in Cambodia up by 15-20 per cent compared to April, transport industry insiders and exporters have said, causing production costs in the Kingdom to rise across the board as a result.

On May 23, the retail price of regular-grade petrol increased by 0.9 per cent, while that of diesel decreased by 6.9 per cent, according to a notice issued by the Ministry of Commerce.

 

For the May 21-31 period, the retail sale prices of fuel in the Kingdom have been set at 5,600 riel ($1.38) per litre of regular EA92 (petrol with an octane rating of at least 92) and 5,400 riel ($1.33) per litre of 50ppm diesel (with sulphur content of no more than 50 parts per million), the notice said.

The corresponding rates for May 11-20 were 5,550 riel ($1.37) and 5,800 riel ($1.42) per litre of petrol and diesel respectively, a significant increase from 4,200 riel ($1.03) and 3,800 riel ($0.94) during the period beginning January 1.

Cambodia Logistics Association president Sin Chanthy told The Post that rising fuel prices have affected all stages of production, from materials costs to prices of finished products. Oil, and subsequently shipping prices in Cambodia began to rise in April, following international market trends, after the Russian military offensive against Ukraine began in February.

“Freight rates across the country have risen by about 15-20 per cent since April, but international rates have been rising since mid-2020 as Covid-19 became more prevalent, leading to rising shipping prices and [costs associated with] container congestion,” he said.

However, Chanthy said: “Considering the economy of Cambodia as well as the world as a whole, [the rise of shipping prices] has not had a significant impact. Some products have seen their prices increase, but no production chain has been stuck or very disrupted.”

Logistics Business Association president Chea Chandara said that transport prices only started to rise in Cambodia in April, as companies were unable to offset financial losses caused by rising fuel prices.

 

“Even though the price of some domestic transport has been raised, it is only to break even,” he said. “There has been no profit to be made.”

Regarding the recent shortage of containers for Cambodian exports, Chandara said this problem has largely been eased and is less likely to happen in the near future.

Cambodia Rice Federation president Song Saran said that the latest increase in fuel prices has not had a significant impact on the domestic rice sector, as mills are operated by electricity, rates of which have not increased.

However, he said, the increase in fuel rates could have an impact on the cost of rice cultivation, as it would raise prices associated with the rental of machinery for ploughing and harvesting.

Saran said that domestic shipping costs have fluctuated “somewhat”, with carriers charging a 20 per cent ‘Fuel Charge’ while international shipping rates remain the same due to prices having already increased before the latest oil price hike.

Regarding the export of Cambodian milled rice to the international market, Saran said that in his view, there is “no big problem” as long as the amount of fuel still in supply remains stable.

He noted that oil has “little effect” on the cost of production of rice products, with costs for dry rice prices increasing just 13 per cent due to its use in water pumping, while producing wet rice does not require the use of fuel at all.

However, he said that if fuel prices continue to rise long-term, the impact will stand to be even greater. “We are considering how much [the increase in fuel prices] will affect [the rice sector] as the situation is changing rapidly. We do not know if the conflict in Ukraine will end sooner or later, and if oil-producing countries can increase production to supply market demand,” he said.

“If fuel prices continue to rise, then shipping prices could rise further, but that does not mean [we should stop] shipping.”

The ministry notice shows that the current tri-monthly regular EA92 rate was calculated by adding the $0.8891 average Means of Platts Singapore (MOPS) over May 11-20, $0.1716 in taxes and associated charges ($0.0847 in customs duty, $0.0200 in additional fees and $0.0669 in special fees) and $0.20 premium – summing up to about $1.261 – plus an extra 10 per cent surcharge on top of that for a total of $1.3863 or 5,632 riel, which were then adjusted to their final values.

Similarly, the diesel rate was computed from a $0.9325 mean MOPS (over the same seven working days), $0.0595 in taxes and associated charges ($0.0000 in customs duty, $0.0400 in additional fees and $0.0195 in special fees) and $0.23 premium – tallying up to around $1.222 – with a 10 per cent surcharge for a sum of $1.3472 or 5,459 riel, which were then rounded to their current values.

Taxes and associated changes were adjusted for the first time since December 16, 2020, revised down by 7.1 per cent and 19.8 per cent, respectively, for petrol and diesel.

The notice mentioned that the two current per-litre rates include a 6.5 US cent reduction approved by Prime Minister Hun Sen “to ease the people’s livelihoods”, up from 4 US cents, which had remained unchanged since July 2018.