Customer Advisory Rates Tariffs

Asia-North America (Trans-Pacific Trade) - Implementation of new Bunker Adjustment Formula effective 1st January 2019

Bunker is one of the important cost components for a container shipping line. And as you are aware, IFO 380 price has shown strong fluctuations in the recent months.

In addition, a new IMO (International Maritime Organization) low sulphur regulation will be applied to all container shipping companies effective 1st January 2020. The regulation stipulates a maximum sulphur content threshold of 0.5% for marine fuels over 100% of the sea distance for any maritime services, including services across the Trans-Pacific Trade.

To be compliant with this new regulation, APL will use low sulphur fuel (LSFO) and the cost per ton is expected to be significantly higher than IFO 380.

Effective 1st January 2019, in order to ensure the sustainability and reliability of our services in this volatile environment, APL will introduce an updated quarterly Bunker Adjustment Formula (BAF), also known as Bunker Surcharge (BSC) in the Transpacific Trade.

You will find here below all the key elements of this BAF:

  • Methodology

o Quarterly revision, based on IFO 380 bunker average price and/or LSFO, depending on contract duration.

  • Implementation

o Effective 1st January 2019, this updated quarterly BAF will be applied to all contracts with duration exceeding 3 months.

  • BAF quantum

o Based on the average tonnage of fuel consumed on the Trans-Pacific Trade and fuel price fluctuation, the following extracts of BAF quantum will be applied.

Table 1
Origins: Asia, Australia, East Africa, Middle East, New Zealand, Papua New Guinea, West Asia(1)
Destinations: Canada, USA (US West Coast/ Group 4 except Hawaii, Puerto Rico and Virgin Islands)

Discharge via: US West Coast ports, Alaska ports, Vancouver, B.C. and Prince Rupert, B.C.

Table1(1) Additional quantum to factor Highway Diesel Fuel Prices will be applied on top of BAF quantum for cargo servicing port of discharge (POD) US West Coast for North America inland (excluding Group 4).

Table 2
Origins: Asia, Australia, East Africa, Middle East, New Zealand, Papua New Guinea, West Asia(2)
Destinations: Canada, USA (except Hawaii, Puerto Rico and Virgin Islands)

Discharge via: US Atlantic-Gulf Coast ports and Halifax, N.S.

Table 2

Table 3
Origins: Canada, USA (except Hawaii, Puerto Rico and Virgin Islands)
Destinations: Asia, Australia, East Africa, Middle East, New Zealand, Papua New Guinea, West Asia(3)

Loading via: US West Coast ports, Alaska ports, Vancouver, B.C. and Prince Rupert, B.C.

Table 3

Table 4
Origins: Canada, USA (except Hawaii, Puerto Rico and Virgin Islands)
Destinations: Asia, Australia, East Africa, Middle East, New Zealand, Papua New Guinea, West Asia(4)

Loading via: US Atlantic-Gulf Coast ports and Halifax, N.S.

Table 4

  • Tiers of USD 25

o Tiers of USD 25 have been set up in order to avoid BAF revision in case of limited variation of Fuel Oil price.
o Applicable BAF will be the corresponding value in the relevant tier.

Example:
If average FO price = USD 469.00 / ton, the corresponding BAF will be USD 486.00 per D40 ($450.01 < $469.00 < $475.00) for Asia to West Coast (refer to Table 1).

  • Bunker reference

o Starting 2019, IFO 380 price will be the reference for Transpacific Trade’s BAF.
o APL is using a single IFO 380 reference for all trades, with the following weight of each port worldwide: 40% Rotterdam IF0 380; 50% Singapore IFO 380; 10% Houston IFO 380.
o Prior to 2020, a new LSFO will apply, and the index will be determined accordingly.

APL will review the BAF on a quarterly basis, and continue to update our customers accordingly.

BAF quarterly

  • Trade coefficient

o Trade Coefficient is defined as = Round Voyage Consumption of Fuel Oil (in ton) per trade divided by number of full TEU carried.

  • Reefer cargo

o A 20% Reefer Consumption Surcharge will be implemented on top of the standard BAF with a minimum of USD$25/TEU.

  • Bunker reference change (from IFO 380 to LSFO)

o To stay compliant with the IMO regulation that takes effect on 1st January 2020, APL will start bunkering with the new LSFO 0.5% sulphur (cost to be confirmed) from second half of 2019 onwards.
o Prior to 2020, the adjustments will 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.

  • Low Sulphur Surcharge

o North America - Low Sulphur Surcharge is included in BAF for the Transpacific Trade, which serves port of loading (POL) and port of discharge (POD) in the ECA of North America
o China, Hong Kong and Taiwan - Effective 1st January 2019, a new Low Sulphur Surcharge will apply on top of BAF for cargo served by port of loading (POL) or port of discharge (POD) in China, Hong Kong and Taiwan.

Should you need any clarification please do not hesitate to contact your local APL Representative. Thank you for your business and continued support.