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. Contargo has therefore decided to include the factors of. BUNKER ADJUSTMENT FACTOR (BAF) - Molpower.com BUNKER ADJUSTMENT FACTOR (BAF) Surcharge for additional fuel cost for carrier, BAF quantum per TEU. It applies to contracts with validity longer than 3 months. why they are used or whether they continue to fit Bunker adjustment factor, bunker surcharges, or simply BAF, are extra charges enacted by carriers on their rates to counteract increases in fuel 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. Additionally, there is little line of sight into how technology and fuel efficiency improvements manifest in what shippers and carriers incur in fuel costs. For example, some updated BAF programs fail to incorporate fuel consumed within emission control areas (ECA) into the calculation. No two carriers set prices the same way. Regardless of how the industry evolves, fuel will continue to be a volatile cost component for shippers and carriers alike. Bunker Adjustment Factor Surcharge Description: BAF is based on TEU, to smooth out the effect of oil price fluctuations on carrier costs. In the individual calculation of the fuel surcharge. 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. And conditions in the watercourse (water level, draft, channel width) play a much greater role for inland barges than they do for seagoing vessels. 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 were calculated using publicly available BAFs from these respective carriers. 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 year 2020 will kick off a decade with new frontiers 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. Global maritime fuel markets are becoming more complex. 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. 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. The BAF is calculated by multiplying the so-called ' trade factor ' by the fuel price. 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. 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. AKA Bunker Surcharge. As speed increases, energy consumption rises disproportionately (by a factor of 3 - 4). Contargo makes continual efforts to keep costs low by implementing a whole bundle of measures. These fuel prices will remain particularly volatile through the fuel market transition. It applies to contracts with validity longer than 3 months. 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 transportation industry is fundamentally changing. Fuel cost varies based on trade lane, vessel type, speed, capacity, and the underlying price of fuel. 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. Many factors have an input into the price calculation for the transport of containers. Nevertheless, it is likely to divide opinion within the shipping industry. New rules on 1 January 2015. Low sulphur surcharges originate from an International Maritime Organization (IMO) initiative to reduce the amount of sulfuric fuel emissions burned by ocean vessels. In 2019, we have used the fuel price for high-sulphur fuel (3.5% sulphur) to calculate the BAF. 400 S. Washington Street, Green Bay, WI 54301. The fuel costs shown reflect the cost of moving a single TEU with an average fuel price of $500/mt. The ship operator is responsible for the payment of these bunkers to the bunker supplier. This field is for validation purposes and should be left unchanged. All our BAF calculations are based on the average price for … The other relevant parameters form an input into the calculation of the price list. This is a fuel correction, i.e., an automatic mechanism correcting transport rates as a result of changes in fuel prices. Bunker Adjustment Factor (BAF) "Bunkers" is the generic name given to fuels and lubricants that provide energy to power ships. As bunker fuel prices are quite volatile, the shipping lines charge a fee called "Bunker Adjustment Factor (BAF)" to cover the … 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). 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. ONE also filed a ONE Bunker Surcharge (OBS) in its FMC tariff. The term "Bunker" refers to the fuel that is used to operate ships. These prices constitute a significant percentage of the total cost of transporting goods. The cost of bunker oil fluctuates continually and with comparatively little warning. Bunker Adjustment Factor, BAF. The container specialist combines the inter-system advantages of the transport modes inland barge, rail and truck. 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