As bunker fuel prices are quite volatile, the shipping lines charge a fee called "Bunker Adjustment Factor (BAF)" to cover the … These surcharges were previously set by … Contargo is also in competition with other service suppliers and always tries to lead the field, not only in the quality of its services but by its reasonable prices. A bunker surcharge, also known as bunker adjustment factor (BAF), is the charge shipper’s incur to compensate for fluctuating fuel prices and is typically in addition to other surcharges and fees added to the freight costs. Remove distorted transportation practices and reveal data-driven insights with FELIX. Bunkering is the action of supplying a ship with bunkers. In such an industry fuel could be considered one of the most critical costs where the fuel may be as high as 50% of the carriers cost. In 2019, we have used the fuel price for high-sulphur fuel (3.5% sulphur) to calculate the BAF. Simply put: BAF = Fuel Prices x Trade Factor The trade factor is average fuel consumption for a given trade varying according to the: Route, Vessel direction, Distance, Transit time, Weight of the load, Size of the container, Build of the ship, Fuel … Bunker calculation having very much significance in bunkering, at times wrong calculation can lead to shortage of bunker, oil spill etc. The shipping lines now set their own independent BAF rates. As speed increases, energy consumption rises disproportionately (by a factor of 3 - 4). No two carriers set prices the same way. The rates are listed below for your convenience (the data refers to ZIM’s base ports in each trade): The changing landscape of the maritime shipping industry highlighted the distortions and inefficiencies in shippers’ existing marine fuel practices. Every car driver is familiar with fluctuating prices of petrol. 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. But shippers often don’t have visibility into how these factors influence their fuel cost. * The details on It periodically changes, typically monthly or quarterly. For example, some updated BAF programs fail to incorporate fuel consumed within emission control areas (ECA) into the calculation. 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. 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. As per MSC, the BRC replaces the current Bunker Contribution (BUC), Fuel Adjustment Factor (FAD) and Emergency Fuel Surcharge (EFS), and largely absorbs other pre-existing fuel-related charges.. Oil Prices and Bunker Adjustment Factor Surcharges. September 9, 2019. The container specialist combines the inter-system advantages of the transport modes inland barge, rail and truck. The BAF is calculated by multiplying the so-called ' trade factor ' by the fuel price. The result is the "Bunker Adjustment Factor" (BAF) or bunker charge. To minimize the effects of these changes, shippers need to implement a program that allows them to clearly see and evaluate their fuel spend. Matt MuensterSenior Manager, Applied Knowledge. In some cases, the same trade lanes with similar levels of service can have drastically different BAF prices. Bunker Adjustment Factor (BAF) August 28, 2020 Dear Customer, Sealand – A Maersk Company has reviewed its Bunker Adjustment Factor (BAF), and the new tariffs will be effective 1 October 2020. 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. 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 Common BAF mechanisms fail to adapt to market dynamics to accurately reflect the cost of fuel that shippers and carriers are exposed to. 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. These surcharges safeguard carriers against one of the most volatile factors in the shipping industry: oil prices. Low sulphur surcharges originate from an International Maritime Organization (IMO) initiative to reduce the amount of sulfuric fuel emissions burned by ocean vessels. Despite recent efforts by the shipping community to refresh BAF programs, gaps still exist. BAF. Bunker Adjustment Factors Are a Thing of the Past. Global maritime fuel markets are becoming more complex. All rights reserved. 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. With a close-knit network of its own terminals and transport lines, Contargo links the seaports in Western Europe with the European hinterland. NOTE 2: ONE calls the above Bunker surcharge the Bunker Adjustment Factor (BAF). The result is the "Bunker Adjustment Factor" (BAF) or bunker charge. The ship operator is responsible for the payment of these bunkers to the bunker supplier. Overall, Hapag-Lloyd says the bunker adjustment factor (BAF) aims for ‘transparent calculation of costs’. The cost of bunker oil fluctuates continually and with comparatively little warning. 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). why they are used or whether they continue to fit Dear ZIM Customer, Following the implementation of the New Bunker Factor (NBF) in February 2019, hereunder are the updated NBF levels effective from December 1 st, 2019 (***) till further notice, applying to FAK (Freight All Kind) cargo, in the trades as detailed below.. This is a fuel correction, i.e., an automatic mechanism correcting transport rates as a result of changes in fuel prices. New Bunker Adjustment Factor (BAF) From 1st January 2020, a new regulation will come into force to reduce air pollution from ships globally. Another determinant is the vessel’s direction. Some factors, such as water levels and fuel prices, are beyond the influence of Contargo. In the individual calculation of the fuel surcharge. Bunker Adjustment Factor (BAF) "Bunkers" is the generic name given to fuels and lubricants that provide energy to power ships. 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. Regardless of how the industry evolves, fuel will continue to be a volatile cost component for shippers and carriers alike. One institution that finds acceptance throughout the transport sector is the Centraal Bureau voor ee Rijn- en Binnenvaart (CBRB) in the Netherlands. Oh, what a tangled web we weave,/ When first we practise to deceive! The fuel costs shown reflect the cost of moving a single TEU with an average fuel price of $500/mt. This field is for validation purposes and should be left unchanged. It applies to contracts with validity longer than 3 months. In 2019, we have used the fuel price for high-sulphur fuel (3.5% sulphur) to calculate the BAF. 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. in data science, artificial intelligence, and Bunker Adjustment Factor Surcharge Description: BAF is based on TEU, to smooth out the effect of oil price fluctuations on carrier costs. 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. The fuel consumed within ECAs is accounted for with a separate surcharge, which complicates fuel cost management. Maersk Line said in a statement in Mumbai that it has introduced a new formula for floating BAF (Bunker Adjustment Factor). Bunker Adjustment Factor, BAF. Inland barge operators are subject to the same kind of variations. today’s strategies. Bunker adjustment factor, bunker surcharges, or simply BAF, are extra charges enacted by carriers on their rates to counteract increases in fuel prices. New rules on 1 January 2015. We use Bunkerworld’s fuel price index 0.5% Sulphur fuel oil (VLSFO) for the BAF and EFF calculation. The other relevant parameters form an input into the calculation of the price list. We use Bunkerworld’s fuel price index 0.5% Sulphur fuel oil (VLSFO) for the BAF and EFF calculation. Contargo has therefore decided to include the factors of. Bunker adjustment factor, bunker surcharge or BAF refers to floating part of sea freight charges which represents additions due to oil prices. The term "Bunker" refers to the fuel that is used to operate ships. Many factors have an input into the price calculation for the transport of containers. BAF charges used to be determined by Carrier Conferences to be applicable for a certain period on a certain trade route.. Everything from a changing regulatory environment, to diversifying fuel portfolios, to advancements in technology will continue to influence marine transport. 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. The European Commission banned Carrier Conferences as of October 17, 2008. The CBRB informs its members and subscribers daily about changes in the price of gasoil and issues a monthly overview and a monthly average value. If the price of gasoil is high, our customers bear the additional load via an increased fuel surcharge, and if gasoil prices go down, we pass on this benefit to our customers in the form of a lower fuel surcharge. BUNKER PRICE/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 271.24 USD/TON. fuel price; distance and; size and weight of the container; In the individual calculation of the fuel surcharge. The Bunker Adjustment Factor (BAF) system was first introduced following the oil shocks of the 1970s. One major emerging challenge is the long-standing inconsistency in BAF practices. Bunker Adjustment Factor (BAF) Q1 2021 Dear customer, Hamburg Süd would like to inform you about the revision of our Bunker Adjustment Factor (BAF) Surcharge for Q1 2021. Matt has a Master’s in Economics and is our internal subject matter expert on international fuel markets. In canals, which generally have no current, this parameter can be discounted. And conditions in the watercourse (water level, draft, channel width) play a much greater role for inland barges than they do for seagoing vessels. 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. 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. All our BAF calculations are based on the average price for … The transportation industry is fundamentally changing. The shipping industry became very energy and capital focused with the development of containerization and usage of containers ships. BAF is an abbreviation of the Bunker Adjustment Factor. In addition to regulatory changes, BAF programs often fail to articulate how geography, vessel type, and fuel consumption on trade lanes may impact costs. One determinant is distance. These fuel prices will remain particularly volatile through the fuel market transition. Marine Gas Oil Bunker Adjustment Factor. Copyright © 2020 CONTARGO. 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%. All Rights Reserved. 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 . Contargo has therefore decided to include the factors of. It applies to contracts with validity longer than 3 months. The year 2020 will kick off a decade with new frontiers Bunker Adjustment Factor (BAF) Surcharge. Contargo makes continual efforts to keep costs low by implementing a whole bundle of measures. One important aspect is the continuous optimisation of all processes, most importantly by the use of intelligent software systems. Some of those surcharges include: Example: Freight rate: Port Elizabeth to Singapore Freight rate: US Dollar: 1 … 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. 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. To ensure that our price structuring stays fair, we pass on the current prices to the customer in the form of a fuel surcharge. Expect to see HSFO discounts to crude oil grow, sending HSFO to lower prices through the coming quarters. All of this makes for a passively managed line item in shippers’ budgets. 2019, Arkas Line will start to publish the new Bunker Adjustment Factor (BAF ) based on regional corridors. Fuel cost varies based on trade lane, vessel type, speed, capacity, and the underlying price of fuel. You will find here below all … Without a mechanism to align these price calculations, shippers often are left in the dark about the irregularity of BAF prices among different carriers. 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. Sign up now and get our fuel advisor brief, 920-617-3070 • 400 S. Washington Street, Green Bay, WI 54301, ©2020 Breakthrough. Nevertheless, it is likely to divide opinion within the shipping industry. 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. This is only one example of how conventional BAFs fail to encompass all fuel cost components, and supports the need for a more agile and comprehensive marine fuel management program. The other charges related to coastal Emission Control Areas (ECAs) will remain in place.. You can read the full calculation mechanism here.. The price ascertained by the CBRB is the basic index for price calculations. 400 S. Washington Street, Green Bay, WI 54301. The fuel price will be the same for all trades and is calculated as the average bunker price in key supply ports around the world over a period said to be "typically" three months. Another relevant parameter is the build of the ship (barge train, single boater). 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