Maersk Ups Bunker Surcharge amid VLSFO Price Rise
- Business & Finance
Prompted by a price surge of very-low sulphur fuel oil (VLSFO) since the implementation start of the sulphur cap 2020, Danish shipping major Maersk has decided to increase its bunker surcharge.
“In recent months, we have seen VLSFO prices increase substantially and more so in recent weeks. In particular, VLSFO price in Asia (Singapore) for a period exceeded 700 USD/TON, more than 20% increase compared to the previous bunker prices used for the Bunker Adjustment Factor (BAF) and Environmental Fuel Fee (EFF) calculation. The average increase in January thus is expected to exceed USD 50/mt,” Maersk said in an advisory.
The tariff increases will be implemented across all trades and will range between 50 to 200 USD per box.
Maersk said the new tariffs will be effective as of March 1, 2020, adding that the actual increases per trade will be communicated by the end of January.
The world’s largest container shipping company revealed earlier that it expects that the new regulation would push up its fuel bill by USD 2 billion per year.
As such, numerous companies, including Maersk, introduced bunker surcharges as a solution, transferring some of these additional costs to the end customers, assigning fuel cost a larger portion of the total freight rate.
The company introduced Bunker Adjustment Factor (BAF) surcharge in 2019 to recover costs of compliance with the global sulphur cap, which mandates the use of fuel with a sulphur content of 0.5% instead of 3.5 %.
The BAF consists of two key elements: the fuel price which is calculated as the average fuel price in key bunkering ports around the world, and a trade factor that reflects the average fuel consumption on a given trade lane.