Bunker Adjustment Factor (BAF) Surcharge. schedules handed for generations without questioning 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. It applies to contracts with validity longer than 3 months. We use Bunkerworld’s fuel price index 0.5% Sulphur fuel oil (VLSFO) for the BAF and EFF calculation. Fuel cost varies based on trade lane, vessel type, speed, capacity, and the underlying price of fuel. Speed is also a significant factor. Contargo is one of the leading, neutral service providers for container logistics in the European hinterland. Share: ... (ECA) into the calculation. The term "Bunker" refers to the fuel that is used to operate ships. 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. Example: Freight rate: Port Elizabeth to Singapore Freight rate: US Dollar: 1 … Every car driver is familiar with fluctuating prices of petrol. 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. Contargo makes continual efforts to keep costs low by implementing a whole bundle of measures. The changing landscape of the maritime shipping industry highlighted the distortions and inefficiencies in shippers’ existing marine fuel practices. These fuel prices will remain particularly volatile through the fuel market transition. The rates are listed below for your convenience (the data refers to ZIM’s base ports in each trade): The other relevant parameters form an input into the calculation of the price list. There is a direct and simple corrrespondence between the distance travelled and the fuel consumption. The fuel consumed within ECAs is accounted for with a separate surcharge, which complicates fuel cost management. Bunkering is the action of supplying a ship with bunkers. 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 cost of bunker oil fluctuates continually and with comparatively little warning. * The details on Bunker Adjustment Factor, BAF. In the individual calculation of the fuel surcharge. The transportation industry is fundamentally changing. Additionally, there is little line of sight into how technology and fuel efficiency improvements manifest in what shippers and carriers incur in fuel costs. With a close-knit network of its own terminals and transport lines, Contargo links the seaports in Western Europe with the European hinterland. Another relevant parameter is the build of the ship (barge train, single boater). All of this makes for a passively managed line item in shippers’ budgets. 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.. 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. Here you can see a few simple and convenient ways to calculate the bunker … Sign up now and get our fuel advisor brief, 920-617-3070 • 400 S. Washington Street, Green Bay, WI 54301, ©2020 Breakthrough. 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. The other relevant parameters form an input into the calculation of the price list. NOTE 2: ONE calls the above Bunker surcharge the Bunker Adjustment Factor (BAF). These surcharges safeguard carriers against one of the most volatile factors in the shipping industry: oil prices. Oil Prices and Bunker Adjustment Factor Surcharges. Bunker adjustment factor, bunker surcharge or BAF refers to floating part of sea freight charges which represents additions due to oil prices. In addition to regulatory changes, BAF programs often fail to articulate how geography, vessel type, and fuel consumption on trade lanes may impact costs. And conditions in the watercourse (water level, draft, channel width) play a much greater role for inland barges than they do for seagoing vessels. All rights reserved. Privacy Policy. Most shippers reimburse for fuel with fuel surcharge Bunker calculation having very much significance in bunkering, at times wrong calculation can lead to shortage of bunker, oil spill etc. The year 2020 will kick off a decade with new frontiers The fuel costs were calculated using publicly available BAFs from these respective carriers. Contargo has therefore decided to include the factors of. 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. Oh, what a tangled web we weave,/ When first we practise to deceive! BUNKER PRICE/TON In canals, which generally have no current, this parameter can be discounted. 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 … 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. Regardless of how the industry evolves, fuel will continue to be a volatile cost component for shippers and carriers alike. These surcharges were previously set by … In 2019, we have used the fuel price for high-sulphur fuel (3.5% sulphur) to calculate the BAF. 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. 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 BAF is calculated by multiplying the so-called ' trade factor ' by the fuel price. Meanwhile, low-sulfur fuel (LSMGO and VLSFO) premiums to crude oil will likely grow, sending low-sulfur fuel to higher prices. The result is the "Bunker Adjustment Factor" (BAF) or bunker charge. As bunker fuel prices are quite volatile, the shipping lines charge a fee called "Bunker Adjustment Factor (BAF)" to cover the … To minimize the effects of these changes, shippers need to implement a program that allows them to clearly see and evaluate their fuel spend. September 9, 2019. 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. One institution that finds acceptance throughout the transport sector is the Centraal Bureau voor ee Rijn- en Binnenvaart (CBRB) in the Netherlands. AKA Bunker Surcharge. Expect to see HSFO discounts to crude oil grow, sending HSFO to lower prices through the coming quarters. The shipping industry became very energy and capital focused with the development of containerization and usage of containers ships. The result is the "Bunker Adjustment Factor" (BAF) or bunker charge. As speed increases, energy consumption rises disproportionately (by a factor of 3 - 4). You will find here below all … All Rights Reserved. Nevertheless, it is likely to divide opinion within the shipping industry. Global maritime fuel markets are becoming more complex. 2019, Arkas Line will start to publish the new Bunker Adjustment Factor (BAF ) based on regional corridors. This is a fuel correction, i.e., an automatic mechanism correcting transport rates as a result of changes in fuel prices. 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 Adjustment Factors Are a Thing of the Past. It periodically changes, typically monthly or quarterly. Matt has a Master’s in Economics and is our internal subject matter expert on international fuel markets. Despite recent efforts by the shipping community to refresh BAF programs, gaps still exist. 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. The fuel costs shown reflect the cost of moving a single TEU with an average fuel price of $500/mt. 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. Maersk Line said in a statement in Mumbai that it has introduced a new formula for floating BAF (Bunker Adjustment Factor). BAF represents the floating price level of fuel in ocean freight shipping and is typically updated on a quarterly basis. The European Commission banned Carrier Conferences as of October 17, 2008. 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. But shippers often don’t have visibility into how these factors influence their fuel cost. For example, some updated BAF programs fail to incorporate fuel consumed within emission control areas (ECA) into the calculation. 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. 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