FICA fuel adjustment factor calculation

As you are well aware as a result of the conflict in the Middle East fuel prices have risen rapidly over the past two weeks. 

FICA has been talking with FOA and MPI regarding the situation and has been asked for the potential impact on Forestry Contractors. 

Our response has been it really depends on how long this goes on. Most Contractors have fuel adjustment factors (FAF) in their contracts, but this is only adjusted monthly or in some cases quarterly so contractors will have to wear immediate price increases until most likely 1 April.

Higher harvesting and cartage rates will obviously reduce returns to Forest Owners. Probably the bigger issue is supply of fuel if this goes on longer.

Forest Owners at this stage seem to be holding production steady, despite the fact that export shipping has increase $US10 to 15/Jas since February and if this goes on longer may increase further.

Other issues regarding shipping relate to bunkers in China having to be ordered a month in advance and no south bound cargos from India that could see vessels steaming empty. This places additional cost and uncertainty when scheduling shipping.

FICA has spoken to Stevedore/Marshalling companies, no indication of reduction export vols. At this stage export holding steady.

At this stage, domestic mills have strong domestic orders, only mills expressing concern are those heavily dependent Middle East markets.

We do understand that additional costs associated with shipping, harvesting and cartage will make it challenging, particularly in regions with high operational costs.

Obviously, the situation is very volatile and things can change.

We’re getting some feedback that some contractors may not have FAF. The Blackburne group have provided the attached model that can used for harvesting and cartage. If you need help give me a call.

We will keep you updated as things evolve.