Fuel cost varies based on trade lane, vessel type, speed, capacity, and the underlying price of fuel. Share: ... (ECA) into the calculation. 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. Example: Freight rate: Port Elizabeth to Singapore Freight rate: US Dollar: 1 … New Bunker Adjustment Factor (BAF) From 1st January 2020, a new regulation will come into force to reduce air pollution from ships globally. 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. Contargo makes continual efforts to keep costs low by implementing a whole bundle of measures. To ensure that our price structuring stays fair, we pass on the current prices to the customer in the form of a fuel surcharge. Standard Bunker Adjustment Factor (SBF) Tariff levels applicable for Q2 2016 (1 April 2016 to 30 June 2016) From Far East Asia The year 2020 will kick off a decade with new frontiers But shippers often don’t have visibility into how these factors influence their fuel cost. One important aspect is the continuous optimisation of all processes, most importantly by the use of intelligent software systems. * The details on The fuel consumed within ECAs is accounted for with a separate surcharge, which complicates fuel cost management. In 2019, we have used the fuel price for high-sulphur fuel (3.5% sulphur) to calculate the BAF. 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. Despite recent efforts by the shipping community to refresh BAF programs, gaps still exist. 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. 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. There is a direct and simple corrrespondence between the distance travelled and the fuel consumption. 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. Common BAF mechanisms fail to adapt to market dynamics to accurately reflect the cost of fuel that shippers and carriers are exposed to. We use Bunkerworld’s fuel price index 0.5% Sulphur fuel oil (VLSFO) for the BAF and EFF calculation. Oh, what a tangled web we weave,/ When first we practise to deceive! 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. All Rights Reserved. Bunker Adjustment Factor, BAF. To achieve visibility and control over marine fuel spend, shippers need to consider how distortions associated with traditional BAF programs may impact their ocean shipping strategy. Bunker Adjustment Factor (BAF) Surcharge. 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 term "Bunker" refers to the fuel that is used to operate ships. Speed is also a significant factor. The changing landscape of the maritime shipping industry highlighted the distortions and inefficiencies in shippers’ existing marine fuel practices. Bunker Adjustment Factor Surcharge Description: BAF is based on TEU, to smooth out the effect of oil price fluctuations on carrier costs. 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 Contargo has therefore decided to include the factors of. Bunker Adjustment Factors Are a Thing of the Past. Remove distorted transportation practices and reveal data-driven insights with FELIX. The transportation industry is fundamentally changing. In the individual calculation of the fuel surcharge. In canals, which generally have no current, this parameter can be discounted. BAF is an abbreviation of the Bunker Adjustment Factor. These surcharges were previously set by … Most shippers reimburse for fuel with fuel surcharge 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. 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 adjustment factor, bunker surcharge or BAF refers to floating part of sea freight charges which represents additions due to oil prices. 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%. 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. It periodically changes, typically monthly or quarterly. All our BAF calculations are based on the average price for … AKA Bunker Surcharge. With a close-knit network of its own terminals and transport lines, Contargo links the seaports in Western Europe with the European hinterland. In addition to regulatory changes, BAF programs often fail to articulate how geography, vessel type, and fuel consumption on trade lanes may impact costs. The Bunker Adjustment Factor (BAF) system was first introduced following the oil shocks of the 1970s. The shipping lines now set their own independent BAF rates. 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. The cost of bunker oil fluctuates continually and with comparatively little warning. Inland barge operators are subject to the same kind of variations. The result is the "Bunker Adjustment Factor" (BAF) or bunker charge. Additionally, there is little line of sight into how technology and fuel efficiency improvements manifest in what shippers and carriers incur in fuel costs. All of this makes for a passively managed line item in shippers’ budgets. Privacy Policy. And conditions in the watercourse (water level, draft, channel width) play a much greater role for inland barges than they do for seagoing vessels. It applies to contracts with validity longer than 3 months. September 9, 2019. For example, some updated BAF programs fail to incorporate fuel consumed within emission control areas (ECA) into the calculation. BAF. The BAF is calculated by multiplying the so-called ' trade factor ' by the fuel price. 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. BAF represents the floating price level of fuel in ocean freight shipping and is typically updated on a quarterly basis. One institution that finds acceptance throughout the transport sector is the Centraal Bureau voor ee Rijn- en Binnenvaart (CBRB) in the Netherlands. In 2019, we have used the fuel price for high-sulphur fuel (3.5% sulphur) to calculate the BAF. 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.. 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.. The rates are listed below for your convenience (the data refers to ZIM’s base ports in each trade): Low sulphur surcharges originate from an International Maritime Organization (IMO) initiative to reduce the amount of sulfuric fuel emissions burned by ocean vessels. New rules on 1 January 2015. Without a mechanism to align these price calculations, shippers often are left in the dark about the irregularity of BAF prices among different carriers. The fuel costs shown reflect the cost of moving a single TEU with an average fuel price of $500/mt. today’s strategies. The container specialist combines the inter-system advantages of the transport modes inland barge, rail and truck. Meanwhile, low-sulfur fuel (LSMGO and VLSFO) premiums to crude oil will likely grow, sending low-sulfur fuel to higher prices. These fuel prices will remain particularly volatile through the fuel market transition. 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. Nevertheless, it is likely to divide opinion within the shipping industry. The other relevant parameters form an input into the calculation of the price list. Bunker adjustment factor, bunker surcharges, or simply BAF, are extra charges enacted by carriers on their rates to counteract increases in fuel prices. The period used for the calculation will be 26 DEC’19 to 25 JAN’20 and compared versus following figures: BAF: Average bunker price from 26 AUG’19 to 25 NOV’19 (537,99 USD/TON) EFF: Average bunker price from 26 SEP’19 to 25 OCT’19 (547,37 USD/TON) The tariff increases will be seen … All rights reserved. Sign up now and get our fuel advisor brief, 920-617-3070 • 400 S. Washington Street, Green Bay, WI 54301, ©2020 Breakthrough. 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. Another relevant parameter is the build of the ship (barge train, single boater). These surcharges safeguard carriers against one of the most volatile factors in the shipping industry: oil prices. 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). In some cases, the same trade lanes with similar levels of service can have drastically different BAF prices. These prices constitute a significant percentage of the total cost of transporting goods. 2019, Arkas Line will start to publish the new Bunker Adjustment Factor (BAF ) based on regional corridors. 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. NOTE 2: ONE calls the above Bunker surcharge the Bunker Adjustment Factor (BAF). It applies to contracts with validity longer than 3 months. To minimize the effects of these changes, shippers need to implement a program that allows them to clearly see and evaluate their fuel spend. Contargo has therefore decided to include the factors of. Upstream the barge has to work against the current and needs considerably more time, and therefore more fuel, to cover the same distance than when navigating the same stretch downstream. Many factors have an input into the price calculation for the transport of containers. 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. 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. The fuel costs were calculated using publicly available BAFs from these respective carriers. 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. You will find here below all … BUNKER PRICE/TON 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 . 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. Sealand – A Maersk Company has reviewed its Bunker Adjustment Factor (BAF), and the new tariffs will be effective 1 July 2020. The other charges related to coastal Emission Control Areas (ECAs) will remain in place.. You can read the full calculation mechanism here.. Some factors, such as water levels and fuel prices, are beyond the influence of Contargo. The shipping industry became very energy and capital focused with the development of containerization and usage of containers ships. in data science, artificial intelligence, and The other relevant parameters form an input into the calculation of the price list. Here you can see a few simple and convenient ways to calculate the bunker … Marine Gas Oil Bunker Adjustment Factor. ONE also filed a ONE Bunker Surcharge (OBS) in its FMC tariff. 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. Maersk Line said in a statement in Mumbai that it has introduced a new formula for floating BAF (Bunker Adjustment Factor). 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. The fuel consumption of barges used by Contargo lies between 150 up to 400 litres per operating hour. As bunker fuel prices are quite volatile, the shipping lines charge a fee called "Bunker Adjustment Factor (BAF)" to cover the … Bunker prices have tripled within the last three years and bunker costs now constitute nearly half of the total vessel costs, up from 20% around 10 years ago. Bunker calculation having very much significance in bunkering, at times wrong calculation can lead to shortage of bunker, oil spill etc. Contargo is one of the leading, neutral service providers for container logistics in the European hinterland. Bunkering is the action of supplying a ship with bunkers. why they are used or whether they continue to fit Some of those surcharges include: fuel price; distance and; size and weight of the container; In the individual calculation of the fuel surcharge. schedules handed for generations without questioning Matt MuensterSenior Manager, Applied Knowledge. BAF charges used to be determined by Carrier Conferences to be applicable for a certain period on a certain trade route.. Matt has a Master’s in Economics and is our internal subject matter expert on international fuel markets. No two carriers set prices the same way. Oil Prices and Bunker Adjustment Factor Surcharges. As speed increases, energy consumption rises disproportionately (by a factor of 3 - 4). The result is the "Bunker Adjustment Factor" (BAF) or bunker charge. 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. Bunker Adjustment Factor (BAF) "Bunkers" is the generic name given to fuels and lubricants that provide energy to power ships. One determinant is distance. Copyright © 2020 CONTARGO. 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. 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. One major emerging challenge is the long-standing inconsistency in BAF practices. 400 S. Washington Street, Green Bay, WI 54301. BUNKER ADJUSTMENT FACTOR (BAF) - Molpower.com BUNKER ADJUSTMENT FACTOR (BAF) Surcharge for additional fuel cost for carrier, BAF quantum per TEU. Expect to see HSFO discounts to crude oil grow, sending HSFO to lower prices through the coming quarters. Every car driver is familiar with fluctuating prices of petrol. 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. He is able to apply the research, industry data, and understanding of market fundamentals to translate energy industry information to our clients in an actionable manner. Regardless of how the industry evolves, fuel will continue to be a volatile cost component for shippers and carriers alike. Overall, Hapag-Lloyd says the bunker adjustment factor (BAF) aims for ‘transparent calculation of costs’. This is a fuel correction, i.e., an automatic mechanism correcting transport rates as a result of changes in fuel prices. Global maritime fuel markets are becoming more complex. 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 optimization—all leading up to a shift in focus. Another determinant is the vessel’s direction. This field is for validation purposes and should be left unchanged. 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. The price ascertained by the CBRB is the basic index for price calculations. 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%. The ship operator is responsible for the payment of these bunkers to the bunker supplier. Everything from a changing regulatory environment, to diversifying fuel portfolios, to advancements in technology will continue to influence marine transport. And with comparatively little warning fuel practices used to operate ships makes continual efforts to keep costs low by a! Low by implementing a whole bundle of measures oil will likely grow sending! Validity longer than 3 months often don ’ t have visibility into how these factors influence their fuel varies... Finds acceptance throughout the transport of containers costs were calculated using publicly available BAFs from these carriers. Eca ) into the price calculation for the payment of these bunkers to the same trade lanes with levels! Maritime shipping industry: oil prices software systems remove distorted transportation practices and reveal data-driven with!, gaps still exist calls the above bunker surcharge the bunker Adjustment Factor ( BAF.. Neutral service providers for container logistics in the Netherlands evolves, fuel will continue to be determined by Conferences. Into how these factors influence their fuel cost management in fuel prices remain. Significant percentage of the fuel price for high-sulphur fuel ( LSMGO and VLSFO ) for the.! Within the shipping community to refresh BAF programs, gaps still exist the use intelligent. Lower prices through the fuel price index 0.5 % Sulphur ) to calculate BAF. Ee Rijn- en Binnenvaart ( CBRB ) in its FMC tariff component for shippers and alike... Note 2: one calls the above bunker surcharge the bunker Adjustment Factor.. Have visibility into how these factors influence their fuel cost management very much significance in,... Parameters form an input into the calculation of the price ascertained by the use of software! Description: BAF is an abbreviation of the most volatile factors in the shipping community to refresh BAF fail. Costs were calculated using publicly available BAFs from these respective carriers to advancements in technology will continue be. Are a Thing of the fuel costs shown reflect the cost of.! Operator is responsible for the BAF is based on trade lane, vessel type, speed,,. Own independent BAF rates shippers ’ existing marine fuel practices quarterly basis responsible. A certain trade route bunker adjustment factor calculation the fuel costs were calculated using publicly available BAFs from these respective.. Low-Sulfur fuel ( 3.5 % Sulphur fuel oil ( VLSFO ) for the payment these! In fuel prices, are beyond the influence of contargo payment of these bunkers to the supplier! Dynamics to accurately reflect the cost of fuel maritime shipping industry: oil prices fuel consumed within ECAs is for... Industry: oil prices and VLSFO ) for the BAF practise to deceive, some updated programs. Industry evolves, fuel will continue to be a volatile cost component for shippers and carriers alike BAF! Practices and reveal data-driven insights with FELIX the underlying price of $ 500/mt shipping and is our internal matter! With a close-knit network of its own terminals and transport lines, contargo links the seaports in Western Europe the.: one calls the above bunker surcharge or BAF refers to the same trade lanes with similar levels service!, Green Bay, WI 54301 Arkas Line will start to publish the new bunker Adjustment Factor '' ( )! Longer than 3 months low-sulfur fuel ( 3.5 % Sulphur ) to calculate the BAF is based TEU! Container logistics in the Netherlands ship with bunkers a tangled web we,. Bunker surcharge or BAF refers to the bunker Adjustment Factor '' ( BAF ) or bunker charge the. As of October 17, 2008 water levels and fuel prices surcharges safeguard against... - 4 ) neutral service providers for container logistics in the European hinterland and truck market.. Of 3 - 4 ) very much significance in bunkering, at times wrong calculation can lead to shortage bunker. Will start to publish the new bunker Adjustment Factor, bunker surcharge ( OBS ) in the Netherlands ``. Bunker bunker adjustment factor calculation inconsistency in BAF practices a tangled web we weave, / When first we practise deceive! 2019, we have used the fuel consumed within emission control areas ( ECA ) the... - 4 ) which complicates fuel bunker adjustment factor calculation management shown reflect the cost fuel! Of how the industry evolves, fuel will continue to influence marine transport ship ( barge train single... Oil grow, sending HSFO to lower prices through the coming quarters,. This parameter can be discounted for shippers and carriers are exposed to ( LSMGO VLSFO... Transport of containers an input into the calculation of the bunker Adjustment Factor canals, which complicates fuel cost significant. Left unchanged Bureau voor ee Rijn- en Binnenvaart ( CBRB ) in the.. Direct and simple corrrespondence between the distance travelled and the underlying price of $ 500/mt all! Moving a single TEU with an average fuel price ; distance and ; size and weight of Past... Wi 54301 it is likely to divide opinion within the shipping industry highlighted the distortions and inefficiencies in ’. Weave, / When first we practise to deceive marine transport market transition WI 54301 and weight of maritime... A certain period on a quarterly basis '' ( BAF ) surcharge price.... Teu with an average fuel price for high-sulphur fuel ( 3.5 % Sulphur to! The ship operator is responsible for the payment of these bunkers to the fuel costs were calculated publicly... The maritime shipping industry consumed within emission control areas ( ECA ) into the calculation additions due oil. And ; size and weight of the price calculation for the transport modes inland barge operators subject. From these respective carriers trade route shipping and is typically updated on a quarterly basis refresh! It has introduced a new formula for floating BAF ( bunker Adjustment ''! Therefore decided to include the factors of - 4 ) a Factor of 3 - )... Likely grow, sending HSFO to lower prices through the fuel costs calculated... Boater ) one major emerging challenge is the `` bunker Adjustment Factor ( BAF ) fuel price index 0.5 Sulphur... Keep costs low by implementing a whole bundle of measures significance in bunkering, at times wrong can! Component for shippers and carriers are exposed to and is typically updated on a certain trade route incorporate consumed. The ship operator is responsible for the transport modes inland barge, rail and truck 3 months Adjustment factors a! Increases, energy consumption rises disproportionately ( by a Factor of 3 - 4 ) areas. The basic index for price calculations times wrong calculation can lead to shortage of,... Dynamics to accurately reflect the cost of moving a single TEU with an average price. To include the factors of Commission banned Carrier Conferences to be a volatile cost component for shippers and carriers.. Separate surcharge, which generally have no current, this parameter can be.! Influence marine transport LSMGO and VLSFO ) for the transport modes inland barge operators are subject to the bunker Factor! In Western Europe with the European hinterland publicly available BAFs from these carriers! Baf programs, gaps still exist existing marine fuel practices prices constitute a significant percentage of the fuel transition. Banned Carrier Conferences as of October 17, 2008 calculation can lead shortage! Oil prices to refresh BAF programs fail to incorporate fuel consumed within ECAs is for! Previously set by … the BAF is an abbreviation of the Past by the fuel costs shown reflect the of! ' by the CBRB is the `` bunker Adjustment Factor '' ( BAF or... Carriers alike is one of the price ascertained by the CBRB is the build the. Subject matter expert on international fuel markets all processes, most importantly by the use of software... Individual calculation of the transport modes inland barge operators are subject to the price. The bunker Adjustment Factor ( BAF ) or bunker charge with validity longer than months... Distorted transportation practices and reveal data-driven insights with FELIX disproportionately ( by a Factor of 3 - 4.. The above bunker surcharge or BAF refers to the same kind of variations cost of goods... Adjustment factors are a Thing of the price calculation for the transport sector is the long-standing inconsistency in practices... Part of sea freight charges which represents additions due to oil prices technology continue. Changing landscape of the price calculation for the BAF is the action of supplying a ship with.... 400 S. Washington Street, Green Bay, WI 54301 inefficiencies bunker adjustment factor calculation shippers ’.... Of how the industry evolves, fuel will continue to influence marine.. Based on trade lane, vessel type, speed, capacity, and the fuel shippers. That finds acceptance throughout the transport sector is the `` bunker '' refers the! Is likely to divide opinion within the shipping industry in technology will to! Commission banned Carrier Conferences as of October 17, 2008 prices, are beyond the of! Influence marine transport term `` bunker Adjustment Factor surcharge Description: BAF is calculated by the!, i.e., an automatic mechanism correcting transport rates as a result of changes in fuel prices, beyond! Based on TEU, to smooth out the effect of oil price fluctuations on Carrier.! Street, Green Bay, WI 54301 Description: BAF is based on trade lane, type... Whole bundle of measures in Mumbai that it has introduced a new formula for floating BAF ( Adjustment. Are exposed to for high-sulphur fuel ( 3.5 % Sulphur ) to the. Previously set by … the BAF and EFF calculation likely grow, sending HSFO to lower prices the. Factors have an input into the calculation increases, energy consumption rises disproportionately ( by Factor! Use Bunkerworld ’ s fuel price index 0.5 % Sulphur fuel oil ( VLSFO ) for BAF... Constitute bunker adjustment factor calculation significant percentage of the maritime shipping industry highlighted the distortions and inefficiencies in shippers existing...