Bunker Adjustment Factor News

Global ratings agency Moody's has downgraded the corporate family rating of French shipping major CMA CGM due to its "materially weaker" liquidity. The rating was downgraded to B2 from B1.Concurrently, the company's senior unsecured ratings were downgraded to Caa1 from B3. The outlook was changed to stable from negative."Today's rating action reflects that CMA CGM's liquidity profile has weakened materially in the last 12 months as a consequence of the acquisition of CEVA Logistics AG, although expected by Moody's to improve somewhat in 2020", says Daniel Harlid, Assistant Vice President -- Analyst and lead analyst for CMA CGM.The downgrade of CMA CGM's rating follows the acquisition of CEVA Logistics AG (Ceva…

Swiss-headquartered MSC expects to pay over $2 billion a year in fuel costs due to tougher global marine fuel rules and will introduce a bunker charge next year to recoup expenses, the world's number two container line said.UN agency the International Maritime Organization (IMO) will prohibit ships from using fuels with sulphur content above 0.5 percent from Jan. 1, 2020, compared with 3.5 percent today, unless they are equipped with exhaust gas cleaning systems, known as scrubbers…

The European Shippers’ Council (ESC) disapproves of the mechanism of surcharges that shipping liners launch to cover the higher rate of lower sulphur fuel. Shippers call for a dialogue with container liners to find the best mechanism to share the costs.A new bunker adjustment factor launched by Maersk aims at covering additional costs that will arise from the upcoming global sulphur regulations. Carriers impose it unilaterally without any negotiation with shippers and ignore a market approach to the global problem.MSC and CMA CGM have recently announced plans that follow the same direction. This does not set an ideal cooperation scenario.The ESC has made a clear request to shipping liners to sit together and discuss all freight costs and to come to a mutual agreement"ESC is monitoring…

The British International Freight Association (BIFA), the trade association for UK freight forwarding and logistics companies, has described the container shipping industry’s recent imposition of a ‘sulphur surcharge’ as unjustified and blatant profiteering.It follows an announcement by Danish giant AP Moller Maersk that it is introducing a new bunker adjustment factor (BAF) surcharge on 1 January 2019, a full year ahead of the global sulphur cap on marine emissions which enters into force on 1 January 2020.According to the shipowner, it could lead to prices of a 40 ft container on the Far East to North Europe route being hiked by anywhere between USD480 to USD840 (depending on fuel price)…

Maersk Line said it will introduce a new Bunker Adjustment Factor (BAF) surcharge designed to recover costs of compliance with the global 0.5 percent sulphur cap set to enter into force on January 1, 2020. The Danish container carrier said it expects its extra fuel costs could exceed $2 billion.The BAF surcharge will be introduced on January 1, 2019, replacing Maersk Line's current Standard Bunker Adjustment Factor (SBF) surcharge. The new surcharge considers the average fuel…

Lower oil prices are sharply reducing the cost of shipping merchandise from Asia to the United States and Europe as the cost of bunker fuel tumbles. Container shipping companies deal with the volatility in fuel prices by adding a separate bunker adjustment factor or fuel surcharge to their freight rates. Fuel can account for more than 60 percent of the total operating costs of moving freight across the oceans so the surcharges are one of the most important elements of total transportation costs.

Drewry Shipping Consultants and The Cleartrade Exchange announced that the World Container Index (WCI), the first Europe-based assessment of container freight rates and index production, is scheduled for launch in September 2011. The index will be designed to provide a new and important facility for the global market to hedge their freight rate risk and see major improvements in forward price discovery through the container derivatives market. Significantly, the new index will be the first of its kind to report weekly freight rates on backhaul as well as headhaul routes and will provide increased efficiencies in hedging strategies for freight users dealing in bulk, commoditised and recovered cargoes.

The general rate increase on the North America to Mediterranean and  North Africa trade which Maersk Line previously announced for 15 June  2009 will now be effective 1 July 2009. Maersk Line has delayed the increase to coincide with the change in Bunker  Adjustment Factor (BAF), also scheduled for 1 July 2009. By combining the rate increase and the BAF into a single event, Maersk Line will simplify tariff and contract maintenance, reducing complexity for customers. The new amounts of the BAF surcharge will be communicated separately. This increase is also a reflection of market developments that have created equipment shortages in some regions and delays onshore, as well as the tightening of available ocean capacity.

Global container shipping, terminals and logistics group Neptune Orient Lines (NOL) reported a net profit for the first half of 2008 (1H08) of $196 million, a rise of 45% over the same period of 2007 (1H07). 1H08 EBIT was $229 million, 30% higher than 1H07. For the second quarter of 2008 (2Q08), a period marked by deteriorating market conditions and significant cost pressures, the company reported a net profit of $76 million (19% lower than 2Q07) and EBIT of $92 million (down 18% on 2Q07). Revenues for 1H08 were up 25% to a record $4.64 billion. 2Q08 revenues rose by 24% to $2.24 billion over the same period of 2007. The NOL Board of Directors has approved an interim tax-exempt (one-tier) dividend of 4 cents per share to be paid on 5 September 2008.

Maersk Line is pleased to introduce a new formula for our floating BAF (Bunker Adjustment Factor). Bunker prices have tripled within the last three years and bunker costs now constitute nearly half of the total vessel costs, up from 20% ten years ago. Maersk Line has built the BAF formula on principles that are common in other transportation industries like airlines and parcel services. In these industries, prices and rates reflect fluctuations in fuel prices, and customers accept this as part of doing business in an industry, which is very reliant on fuel. The formula builds on elements such as fuel consumption, transit time, and imbalances of container flows. However, only changes in the oil price will entail changes in the BAF level.

Adjustment Factor (BAF) between Mediterranean ports and the United States and Canada. The change follows the higher oil prices. $ 453 (currently $ 399) per 20 ft. $ 906 (currently $ 798) per 40 ft. Turkmenistan, Azerbaijan, Uzbekistan, Kyrgyzstan, Italy, Cyprus, Albania, San Marino, Slovenia, Egypt, Bosnia & Herzegovina, Syria, Serbia & Montenegro, Croatia, Turkey, Lebanon, Macedonia, Greece, Malta, Libya, Tunisia, Algeria, Spain, Portugal, Morocco, Andorra, Gibraltar, and France (via Mediterranean ports).

Neptune Orient Lines (NOL) reported a net profit of $187m for the first half of 2006, down 52% from the same period of 2005. The company posted a second quarter net profit of $67 million, 66% lower than in 2005. NOL Chairman Mr Cheng Wai Keung, said: “After record financial performances in the past three years, we are now in a more challenging business environment, which is reflected in reduced earnings for the first half of 2006. “Business conditions for both our liner and logistics segments have become more difficult. 1H 2006 total Group revenues rose slightly year-on-year to $3.52b, while the Group’s Core Earnings Before Gross Interest Expense, Tax and Non-Recurring Items (EBIT) of $227m was down 47% from the corresponding period of 2005.

Container shipping lines operating on the Atlantic will reportedly start imposing surcharges to reflect rising bunker fuel costs. A bunker adjustment factor of $21 per 20 ft container and $42 per 40/45 ft container for traffic to and from U.S. Atlantic/Gulf coast ports will be added from October 13, the Trans-Atlantic Conference Agreement (TACA) said. Meanwhile, container shipping lines in the North Europe - Asia eastbound management agreement (EMA) will raise freight rates beginning Oct. 1, a result of improving business. The carriers have confirmed a $200 per container across the board increase.