Fuel surcharges are additional fees added to the price of carrier transport services, to compensate for the fluctuating fuel costs they incur. They are common practice across the industry.
Due to the often rapid change of fuel costs, carrier margins can be quickly minimised. As such, surcharges enable them to recover costs, account for locked-in contracts, and even increase profits when fuel costs sky rocket.
In short, these additional charges enable carriers to keep the wheels of your supply chain moving in the face of escalating fuel costs.
The current unrest in The Middle East, in addition to Western sanctions on Russia, are driving up the cost of fuel significantly of late.
In fact, in a recent article by the BBC News, A.P. Moller – Maersk CEO, Vincent Clerc, highlighted that fuel price increases and disruptions to key routes (particularly the Strait of Hormuz and the Red Sea) are driving up freight costs by roughly $200 per 20ft container, or 15–20%.
But, what does the impact of rising fuel surcharges look like? Read on to find out.
How are the Charges Calculated?
Different carriers likely have their own ways of calculating their fuel surcharges, but generally, it will involve them comparing the current cost of fuel to the baseline price, and calculating the figure they need to reach their previously expected profit from your service.
It’s above this baseline when these additional charges are applied, either as a percentage of the total service cost, or as a fixed price per service.
How Will Fuel Surcharges Impact Your Organisation?
For organisations, like those we support with bonded and non-bonded warehousing, ecommerce fulfilment (including reverse logistics), and transport across the UK, EU and ROW, the impact of these additional charges could be multi-layered, affecting your:
- Transport service costs
- Network strategy
- Pricing – impacting your end users
- Competitiveness – impacting your market positioning
How Will Fuel Surcharges Impact 3PL Providers?
For 3PLs like Delamode, we’re the first line of defence between carriers and you, the client/organisation.
As such, third party logistics providers managing freight are the first to incur the fuel surcharges, which are then typically passed onto you, the brand or the shipper we’re serving.
How Delamode Are Navigating the Impact
At Delamode International Logistics, we work with a broad network of transport and logistics partners and operate across 26 countries, giving us strong purchasing power as a group.
This scale allows us to manage fuel surcharges and other transport-related cost pressures more effectively, and helps to drive down costs where possible, while offering you a wide range of transport, warehousing, and distribution solutions across multiple markets.
How We’re Helping Our Clients Navigate the Impact
We are working closely with our carrier and logistics partners to help them navigate the impact of fuel surcharges across the UK, EU, and global markets.
While the situation remains fluid, particularly with ongoing disruption and uncertainty in the Middle East, our teams are staying in regular contact with our suppliers to gather and provide clients with the latest updates and as much clarity as possible, as quickly as possible.
At this stage, much of the industry is reacting to changing conditions, but we are taking a proactive approach by monitoring developments closely, communicating updates to clients, and exploring alternative routing or transport options where possible to help minimise disruption and manage cost pressures.
If you’re a Delamode client with questions about fuel surcharges, don’t hesitate to get in touch with your account manager. Alternatively, if you’re looking for a new 3PL partner to guide you through the ever evolving logistics landscape, contact our team today to discuss your 3PL requirements.
We’re based on the dockside of Southampton port, follow a port-centric model, and with a twin fulfilment centre in Roosendall Netherlands and a 24-hour shuttle service between the two, we can help you reach retailers and ecommerce customers across the UK, EU and ROW.
