New BAF on Indian Subcontinent & Middle East-Red Sea/Asia trade
Bunker is one of the most important costs for a container shipping line. IFO 380 price has shown strong fluctuations in the previous months. 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 Indian Subcontinent and Middle East-Red Sea-Asia.
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 volatile environment, CMA CGM will introduce a new quarterly Bunker Adjustment Formula (BAF) for long term contracts starting from 1st of January 2019.
You will find here below all 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 a minimum validity of 6 months starting as from January 1st, 2019.
Based on the average tonnage of fuel consumed on Indian Subcontinent & Middle East-Red Sea/Asia 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 Indian Subcontinent & Middle East-Red Sea/Asia trade will be communicated later on as per applicable regulations.
*Above figures are based on CMA CGM Fleet deployment on Indian Subcontinent & Middle East-Red Sea/Asia trade as of Q3 2018.
IFO 380 price is the reference for Indian Subcontinent & Middle East-Red Sea/Asia 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.
Following links can be used to monitor IFO 380 variation:
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.
Should you need any clarification please do not hesitate to contact us.