Hauliers apply fuel adjustment factor

Alan Peat
THE IMPACT of the latest fuel price increases on the profit margins for the majors in the SA trucking industry are not as bad as could be presumed, according to Jim Campbell of Unitrans.
This because these big road transporters (representing about 80% of road haulage) have what can be termed a "fuel adjustment factor" - similar to shipping lines' bunker adjustment factor (BAF) - built into most of their contracts.
"We at Unitrans, for example, have about 1 000 vehicles on the road. At least 80% of these are contractual and we therefore pass on a proportional amount of the fuel price increase.
"All the other majors do something similar, having to cover themselves for costs beyond their control."
The same contractual condition, therefore, also applies to tyres, vehicle prices and the like, calculated on an annual basis.
"We apply a percentage of the escalation," said Campbell. "The formula is quite complex, and is designed to suit both parties.
"It is agreed with our clients beforehand."
This should mean that a proportion of any price increases - such as the latest fuel hike - are passed on to the trucker's client base, and ultimately to the end consumer of the product.
"But," said Campbell, "while our margins should not change significantly with the diesel price increase, this is not always the case.
"For certain export products, for example, our rates are dictated by international export prices and don't necessarily allow us to recover all the cost increases that we face."