bunker adjustment factor calculation

2019, Arkas Line will start to publish the new Bunker Adjustment Factor (BAF ) based on regional corridors. Oil Prices and Bunker Adjustment Factor Surcharges. optimization—all leading up to a shift in focus. Bunker Adjustment Factor Surcharge Description: BAF is based on TEU, to smooth out the effect of oil price fluctuations on carrier costs. The fuel consumed within ECAs is accounted for with a separate surcharge, which complicates fuel cost management. 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. One important aspect is the continuous optimisation of all processes, most importantly by the use of intelligent software systems. Bunker Adjustment Factor (BAF) Surcharge. In the individual calculation of the fuel surcharge. 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. 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 These prices constitute a significant percentage of the total cost of transporting goods. Bunker Adjustment Factors Are a Thing of the Past. The year 2020 will kick off a decade with new frontiers All Rights Reserved. Matt has a Master’s in Economics and is our internal subject matter expert on international fuel markets. Matt MuensterSenior Manager, Applied Knowledge. today’s strategies. 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. 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. 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). The result is the "Bunker Adjustment Factor" (BAF) or bunker charge. Speed is also a significant factor. AKA Bunker Surcharge. Without a mechanism to align these price calculations, shippers often are left in the dark about the irregularity of BAF prices among different carriers. Another relevant parameter is the build of the ship (barge train, single boater). The cost of bunker oil fluctuates continually and with comparatively little warning. 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. The fuel consumed within ECAs is accounted for with a separate surcharge, which complicates fuel cost management. The shipping lines now set their own independent BAF rates. The result is the "Bunker Adjustment Factor" (BAF) or bunker charge. 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. Most shippers reimburse for fuel with fuel surcharge The fuel costs shown reflect the cost of moving a single TEU with an average fuel price of $500/mt. This is a fuel correction, i.e., an automatic mechanism correcting transport rates as a result of changes in fuel prices. All our BAF calculations are based on the average price for … The container specialist combines the inter-system advantages of the transport modes inland barge, rail and truck. To ensure that our price structuring stays fair, we pass on the current prices to the customer in the form of a fuel surcharge. 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 … why they are used or whether they continue to fit NOTE 2: ONE calls the above Bunker surcharge the Bunker Adjustment Factor (BAF). To minimize the effects of these changes, shippers need to implement a program that allows them to clearly see and evaluate their fuel spend. BAF. 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. Bunker Adjustment Factor (BAF) "Bunkers" is the generic name given to fuels and lubricants that provide energy to power ships. One institution that finds acceptance throughout the transport sector is the Centraal Bureau voor ee Rijn- en Binnenvaart (CBRB) in the Netherlands. Bunker calculation having very much significance in bunkering, at times wrong calculation can lead to shortage of bunker, oil spill etc. 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%. Meanwhile, low-sulfur fuel (LSMGO and VLSFO) premiums to crude oil will likely grow, sending low-sulfur fuel to higher prices. Fuel cost varies based on trade lane, vessel type, speed, capacity, and the underlying price of fuel. As speed increases, energy consumption rises disproportionately (by a factor of 3 - 4). 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. The European Commission banned Carrier Conferences as of October 17, 2008. Inland barge operators are subject to the same kind of variations. These surcharges were previously set by … Another determinant is the vessel’s direction. The fuel costs were calculated using publicly available BAFs from these respective carriers. Privacy Policy. Oh, what a tangled web we weave,/ When first we practise to deceive! The fuel consumption of barges used by Contargo lies between 150 up to 400 litres per operating hour. Maersk Line said in a statement in Mumbai that it has introduced a new formula for floating BAF (Bunker Adjustment Factor). September 9, 2019. These surcharges safeguard carriers against one of the most volatile factors in the shipping industry: oil prices. Expect to see HSFO discounts to crude oil grow, sending HSFO to lower prices through the coming quarters. 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 . There is a direct and simple corrrespondence between the distance travelled and the fuel consumption. Bunkering is the action of supplying a ship with bunkers. In canals, which generally have no current, this parameter can be discounted. Marine Gas Oil Bunker Adjustment Factor. Some factors, such as water levels and fuel prices, are beyond the influence of Contargo. The term "Bunker" refers to the fuel that is used to operate ships. 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. 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. One major emerging challenge is the long-standing inconsistency in BAF practices. 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. New Bunker Adjustment Factor (BAF) From 1st January 2020, a new regulation will come into force to reduce air pollution from ships globally. The transportation industry is fundamentally changing. 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. Remove distorted transportation practices and reveal data-driven insights with FELIX. New rules on 1 January 2015. 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. 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 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. 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. No two carriers set prices the same way. 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. 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. 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 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. BAF charges used to be determined by Carrier Conferences to be applicable for a certain period on a certain trade route.. in data science, artificial intelligence, and 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%. Share: ... (ECA) into the calculation. Every car driver is familiar with fluctuating prices of petrol. The other relevant parameters form an input into the calculation of the price list. The changing landscape of the maritime shipping industry highlighted the distortions and inefficiencies in shippers’ existing marine fuel practices. * The details on The BAF is calculated by multiplying the so-called ' trade factor ' by the fuel price. Contargo is one of the leading, neutral service providers for container logistics in the European hinterland. Despite recent efforts by the shipping community to refresh BAF programs, gaps still exist. 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