Maersk have released the below customer advisory:
New Bunker Adjustment Factor (BAF)
From 1st January 2020, a new regulation will come into force to reduce air pollution from ships globally. 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 regulation has been developed and adopted by the International Maritime Organisation (IMO), which is a specialised agency under the United Nations (UN). It will reduce sulphur pollution from shipping by more that 80%, and therefore have a very significant positive impact on the environment and human health.
Maersk Line fully support the regulation, and our preparations to ensure compliance are well underway. The cost of compliance with the new regulation will be significant, so the cost of shipping will increase. It is also expected that the volatility of fuel costs for shipping will increase as the regulation enters into effect. In order to allow customers to predict, plan and track how changes in fuel price will impact shipping freight rate, Maersk Link will introduce a simple and predictive Bunker Adjustment Factor (BAF). The new BAF will replace the existing Standard Bunker Factor (SBF) and allow customers to simulate and calculate the BAF tariff at any fuel price for a given trade route.
The BAF tariff is designed to recover fuel related costs, and it will be changing separately from the basic ocean freight as the fuel cost is very significant and volatile part of shipping costs.
The BAF consists of a trade factor and the fuel price:
Fuel price x Trade factor = BAF
The fuel price is calculated as the average fuel price in key bunkering ports around the world, whereas the trade factor reflects the average fuel consumption on a given trade as a result of variables like transit time, fuel efficiency and trade imbalance.
We will introduce the new BAF from 1st January 2019. This will allow you to get familiar with how the mechanism works before the new sulphur regulation enters into force in 2020.
We want to thank you for your business and look forward to continuously serving your global transportation needs.