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