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.
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 Africa and Indian Subcontinent, Middle East and Red Sea.
To be compliant with this new regulation, CMA CGM will use low sulphur fuel (LSFO) and the cost per ton is expected to be significantly higher than IFO 380.
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.
The key elements of this BAF:
Quarterly revision, based on IFO 380 bunker average price or LSFO depending on contract duration.
This new quarterly BAF will be applied for all contracts with validity period above 3 months starting as from January 1st, 2019.
Based on the average tonnage of fuel consumed on Africa-Indian Subcontinent, Middle East and Red Sea trade, the following quantums will be applied depending on the fuel price fluctuation.
Below table is only given as an example of BAF quantums per container size. Official BAF tariffs for Africa to Indian Subcontinent, Middle East and Red Sea trade will be communicated at a later stage as per applicable regulations.
IFO 380 price is the reference for Africa-Indian Subcontinent, Middle East and Red Sea 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 January 1st, 2020, CMA CGM will start bunkering the new LSFO 0,5% sulfur 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, October 19