MSC clarifies Bunker Recovery Charge mechanism

MSC clarifies Bunker Recovery Charge mechanism
The new surcharge will be implemented from January 1, 2019

MSC has revealed the exact mechanism used to calculate its Bunker Recovery Charge (BRC), which will come into effect January 1 2019 in order to comply with the International Maritime Organisation (IMO)’s 2020 sulphur cap.

The formula for the BRC consists of the fuel price per tonne multiplied by the Trade Factor coefficient – fuel consumption per round trip divided by teu carried round trip.

For example, if the fuel price was US$500 for the Asia-Europe route, the BRC would be US$310 and, at the same price, for the Europe-Asia route the BRC would be US$120.

Currently, the formula’s fuel price is based on the monthly average of the HSFO 380 CST index for each specific trade/service.

Although, to be ready for January 1 2020, a monthly average of a low-sulphur fuel oil 0.5% index may apply from the fourth quarter of 2019.

For reefer cargo, the BRC will be calculated as the BRC multiplied by 1.5 due to the additional cost of electricity generation used to power reefer containers.

MSC has said that the Trade Factor coefficient may change depending on modifications to the size, number of ships and container imbalance on any given trade.

According to the carrier, the BRC for January 1 2019 is set one month in advance, based on the fuel price average of November and the BRCs will be updated monthly and communicated accordingly.

The BRC will replace the current Bunker Contribution (BUC), Fuel Adjustment Factor (FAD) and Emergency Fuel Surcharge (EFS) and largely absorb other pre-existing fuel related charges.

It does not, however, cover charges related to coastal Emission Control Areas as defined by the IMO, EU or other government bodies.

The IMO requires that sulphur content in the fuel used for international shipping must be limited globally to 0.5% by January 1 2020 with the aim to minimise emissions of sulphur oxides from ships.

In order to comply with the IMO, the carrier estimated that the changes it was making to its fleet and supply regulation would cost an excess of US$2bn per year.

In a statement the company said: “After considerable analysis of operating costs and related market factors, MSC has established a new price mechanism – the BRC – which will be transparent to respective trades.

“It will reflect the true additional cost that MSC will incur has a result of the regulatory changes we all support in order to protect the environment.”