CMA CGM outlines its Bunker Adjustment Formula

CMA CGM outlines its Bunker Adjustment Formula

CMA CGM has clarified its Bunker Adjustment Formula (BAF), which will take effect on January 1, 2019 to comply with the International Maritime Organisation (IMO)’s low sulphur regulation.

The carrier has chosen to use low sulphur fuel (LSFO) to adhere to the new regulation, as the IMO has set a maximum sulphur content threshold of 0.5% for marine fuels from January 1, 2020.

As the cost per tonne for LSFO is expected to be significantly higher than the current IFO 380, the shipping line has introduced a new quarterly BAF for long term contracts.

For 2019 the formula, fuel price per tonne multiplied by the trade coefficient, will use one single IFO 380 reference price for all trades.

It will be based on major bunkering places – 50% Singapore IFO 380, 40% Rotterdam IFO 380 and 10% Houston IFO 380 – however, for 2020, a new index is to be determined in the third quarter of 2019.

The trade coefficient is equal to the round voyage consumption of fuel oil in tonne per trade divided by the number of full teu carried.

For reefer cargo, a specific surcharge of 20% on top of dry BAF will be implemented and later on, CMA CGM has stated that a specific reefer BAF – dry BAF x 1.2 – will be published.

The BAF will only be applicable on all contracts or quotations with at least three-month validity and will be applied on top of freight.

Short-term contracts and quotations that have a validity of less than three months will instead be subject to an Emergency Bunker Surcharge (EBS) of US$100 per teu for dry cargo and US$130 per teu for reefers.

CMA CGM has said that existing 2018 contracts with BAF Valid at Time of Shipping (VATOS) still valid during the first quarter of 2019 will keep on running with the former BAF formula.

The BAF will be reviewed on a quarterly basis with a one month notice and the carrier said that tiers of US$25 have been set up in order to avoid BAF revision in case of limited variation of fuel oil price.