We have used Bunkerworld’s fuel price index for 0.5% Sulphur fuel oil (VLSFO) for the BAF calculation and the average bunker price used is 323,87 USD/TON. Common BAF mechanisms fail to adapt to market dynamics to accurately reflect the cost of fuel that shippers and carriers are exposed to. All Rights Reserved. The year 2020 will kick off a decade with new frontiers Another relevant parameter is the build of the ship (barge train, single boater). Many factors have an input into the price calculation for the transport of containers. You will find here below all … One determinant is distance. We use Bunkerworld’s fuel price index 0.5% Sulphur fuel oil (VLSFO) for the BAF and EFF calculation. Privacy Policy. To ensure that our price structuring stays fair, we pass on the current prices to the customer in the form of a fuel surcharge. It periodically changes, typically monthly or quarterly. BAF charges used to be determined by Carrier Conferences to be applicable for a certain period on a certain trade route.. Inland barge operators are subject to the same kind of variations. Global maritime fuel markets are becoming more complex. In this way it is possible to compensate to some extent the general cost drivers such as energy, wages and salaries, and generally rising prices. Some of those surcharges include: fuel price; distance and; size and weight of the container; In the individual calculation of the fuel surcharge. In order to ensure the sustainability & reliability of our services in this volatile environment, CMA CGM will introduce a new quarterly Bunker Adjustment Formula (BAF) for long term contracts starting from 1st of January 2019. On 1 January 2015, the EU Sulphur Directive 2012/33/EU brought about a major reduction in sulphur dioxide emission from ships, and that will heavily impact shipping in northern Europe. In some cases, the same trade lanes with similar levels of service can have drastically different BAF prices. Bunker Adjustment Factors Are a Thing of the Past. schedules handed for generations without questioning All our BAF calculations are based on the average price for … Despite recent efforts by the shipping community to refresh BAF programs, gaps still exist. We have used Bunkerworld’s fuel price index for 0.5% Sulphur fuel oil (VLSFO) for the BAF calculation, and the average bunker price used is 271.24 USD/TON. All of this makes for a passively managed line item in shippers’ budgets. As part of this process, both specific trade lane characteristics and shipper’s network profile can be accounted for to create an accurate and fair fuel reimbursement mechanism that adjusts to market realities and fluctuates with changes in bunker prices. Without a mechanism to align these price calculations, shippers often are left in the dark about the irregularity of BAF prices among different carriers. There is a direct and simple corrrespondence between the distance travelled and the fuel consumption. Bunker Adjustment Factor Tips: Smaller charges like this can add confusion, so smaller customers usually receive or should ask for, an all-inclusive port to port charge. Most shippers reimburse for fuel with fuel surcharge The fuel consumed within ECAs is accounted for with a separate surcharge, which complicates fuel cost management. BAF. 400 S. Washington Street, Green Bay, WI 54301. Bunker, Bunkering and Bunker Adjustment Factor September 28, 2017 August 1, 2011 by Hariesh Manaadiar Categories FAQ , Questions and Answers , Shipping and Freight Tags Bunker , Fuel oil , IFO , Marine diesel oil , Maritime 32 Comments Estimated reading time = 2 minutes Also called ‘Fuel Adjustment Factor’ or ‘Bunker Surcharge’, BAF represents the floating part of sea freight charges to adjust the volatility of the fuel prices. Matt MuensterSenior Manager, Applied Knowledge. Regardless of how the industry evolves, fuel will continue to be a volatile cost component for shippers and carriers alike. The fuel costs were calculated using publicly available BAFs from these respective carriers. Bunker adjustment factor, bunker surcharge or BAF refers to floating part of sea freight charges which represents additions due to oil prices. Bunker Adjustment Factor Surcharge Description: BAF is based on TEU, to smooth out the effect of oil price fluctuations on carrier costs. We have used Bunkerworld’s fuel price index for 0.5% Sulphur fuel oil (VLSFO) for the BAF calculation, and the average bunker price used is 313.31 USD/TON We have used Bunkerworld’s fuel price index for 0.5% Sulphur fuel oil (VLSFO) for the BAF calculation, and the average bunker price used is 313.31 USD/TON. The shipping lines now set their own independent BAF rates. The transportation industry is fundamentally changing. Maersk Line said in a statement in Mumbai that it has introduced a new formula for floating BAF (Bunker Adjustment Factor). ONE also filed a ONE Bunker Surcharge (OBS) in its FMC tariff. The changing landscape of the maritime shipping industry highlighted the distortions and inefficiencies in shippers’ existing marine fuel practices. Accordingly, Safmarine will apply the additional monthly trigger defined in our Bunker Adjustment Factor (BAF) and Environmental Fuel Fee (EFF) formulas and the new tariffs will be effective 1 March 2020. In the individual calculation of the fuel surcharge. New Bunker Adjustment Factor (BAF) From 1st January 2020, a new regulation will come into force to reduce air pollution from ships globally. Low sulphur surcharges originate from an International Maritime Organization (IMO) initiative to reduce the amount of sulfuric fuel emissions burned by ocean vessels. Another determinant is the vessel’s direction. Fuel cost varies based on trade lane, vessel type, speed, capacity, and the underlying price of fuel. NOTE 2: ONE calls the above Bunker surcharge the Bunker Adjustment Factor (BAF). This new BAF will be calculated based on a simple formula that bunker price per ton will be multiplied by regional trade driver as in the following: REGIONAL . Laval Group needs to get a better understanding of the bunker adjustment factor, currency adjustment factor and terminal handling cost, which shipping companies add to their base price, and to take control over the surcharge variations during the year. Expect to see HSFO discounts to crude oil grow, sending HSFO to lower prices through the coming quarters. optimization—all leading up to a shift in focus. All rights reserved. The fuel costs shown reflect the cost of moving a single TEU with an average fuel price of $500/mt. Every car driver is familiar with fluctuating prices of petrol. The weight of the load also influences fuel consumption: in the same conditions (with sufficient depth below the keel) the influence of the load is between 15 - 25%. Contargo has therefore decided to include the factors of. To capture accurate marine transport fuel costs, shippers and carriers need to establish a transparent baseline that aligns with the consumption and cost of fuel needed to move a unit of shipper’s cargo from origin to destination. Overall, Hapag-Lloyd says the bunker adjustment factor (BAF) aims for ‘transparent calculation of costs’. Oil Prices and Bunker Adjustment Factor Surcharges. Speed is also a significant factor. The European Commission banned Carrier Conferences as of October 17, 2008. For example, the fuel cost of moving a twenty-foot equivalent unit (TEU) from Shanghai to LA/Long Beach varies across carriers by a factor of 4 (as shown above). Americas Shipping and Cargo Services Sealand – A Maersk Company has reviewed its Bunker Adjustment Factor (BAF), and the new tariffs will be effective 1 October 2020. In 2019, we have used the fuel price for high-sulphur fuel (3.5% sulphur) to calculate the BAF. BUNKER PRICE/TON Share: ... (ECA) into the calculation. As previously communicated, our revised Bunker Adjustment Factor (BAF) is designed to adjust contract rates within the duration of a contract, based on fluctuations in fuel-related costs. BAF represents the floating price level of fuel in ocean freight shipping and is typically updated on a quarterly basis. For the actual fuel consumption of an inland barge, however, various other factors come into play as well as the purchase price of gasoil: In theory it would be possible to include all these factors individually in calculations for each transported container, but in practice this would overcomplicated and very time-consuming. This is a fuel correction, i.e., an automatic mechanism correcting transport rates as a result of changes in fuel prices. In 2019, we have used the fuel price for high-sulphur fuel (3.5% sulphur) to calculate the BAF. The purchase price per 100 litres of gasoil regularly ascertained by the CBRB in a market survey forms the basis for all carriers’ calculations when determining fuel surcharges. Whereas today ships can use fuel with up to 3.5% sulphur content (outside Emission Control Areas), the new global sulphur cap will be 0.5%. The other relevant parameters form an input into the calculation of the price list. Sealand – A Maersk Company has reviewed its Bunker Adjustment Factor (BAF), and the new tariffs will be effective 1 July 2020. 2019, Arkas Line will start to publish the new Bunker Adjustment Factor (BAF ) based on regional corridors. These surcharges safeguard carriers against one of the most volatile factors in the shipping industry: oil prices. As bunker fuel prices are quite volatile, the shipping lines charge a fee called "Bunker Adjustment Factor (BAF)" to cover the … Marine Gas Oil Bunker Adjustment Factor. AKA Bunker Surcharge. 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