New BAF on Asia-North Europe & Mediterranean trades

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To be compliant with new regulations in the shipping industry, CMA CGM has decided to use low sulphur fuel (LSFO) which will raise the cost per ton. It is expected to be significantly higher than IFO 380, the company said on Thursday.

Bunker is one of the most important costs for a container shipping line. IFO 380 price has increased considerably over the last 12 months with a 40 % year to date increase compared to 2017 average.

In order to ensure the sustainability & reliability of our services in this challenging environment, CMA CGM will introduce a new quarterly Bunker Adjustment Formula (BAF) for long term contracts starting from 1st of January 2019.

“On top of the above a new IMO (International Maritime Organization) low sulphur regulation will be applicable to all container shipping companies as from 1st of January 2020. It will set a maximum sulphur content threshold of 0.5% for marine fuels over 100% of the sea distance for any maritime services, including between Asia and Europe,” the company added.

BAF Methodology:

Quarterly revision, based on IFO 380 bunker average price or LSFO depending on contract duration.

Implementation:

This new quarterly BAF will be applied for all contracts with a minimum validity of 6 months starting as from January 1st, 2019.

BAF quantums:

Based on the average tonnage of fuel consumed on Asia / North Europe & Mediterranean trades, the quantums will be applied depending on the fuel price fluctuation.

Official BAF tariffs for Asia-North Europe & Mediterranean trades will be communicated later on as per applicable regulations, the company said.

Bunker reference:

IFO 380 price is the reference for Asia – North Europe & Mediterranean Bunker Adjustment Formula. CMA CGM is using one single IFO 380 reference for all trades, below is the weight of each port worldwide: 40% Rotterdam IF0 380, 50% Singapore IFO 380, 10% Houston IFO 380.

Bunker reference change (from IFO 380 to LSFO):

As from the second half of 2019, to be compliant with the IMO regulations effective on 01-jan-2020, CMA CGM will start bunkering the new LSFO 0.5% sulphur at a cost that is unknown for time being. The adjustment falling into 2020 will therefore be based on the variation between the average cost of one ton of IFO and the average cost of one ton of LSFO 0.5% at the date of review.

Sea News, September 28

Baibhav Mishra
Author: Baibhav Mishra

Associate Editor, Sea News