Maersk to cover cost of sulfur cap via “Bunker Adjustment Factor”

SEPTEMBER 17, 2018 — Maersk Line today told customers that the cost of complying with the IMO global sulfur cap “will be significant, so the cost of shipping will increase.”

Maersk says that it is also expected that the volatility of fuel costs for shipping will increase as the regulation enters into effect.

To allow customers to predict, plan and track how changes in fuel price will impact total shipping freight rate, Maersk Line will introduce what it calls “a simple and predictive Bunker Adjustment Factor (BAF)” that 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.

Maersk will introduce the new BAF from January 1, 2019, telling customers, “this will allow you get familiar with how the mechanism works before the new sulfur regulation enter into force in 2020.”

The BAF tariff is designed to recover fuel related costs, and it will be charged separately from the basic ocean freight as the fuel cost is a 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.

The table below shows examples only of the expected trade-specific BAF tariffs at different fuel prices.