Maersk swaps surcharge mechanism ahead of 2020 sulphur cap

Maersk swaps surcharge mechanism ahead of 2020 sulphur capImage courtesy of Maersk

The shipping giant A.P. Moller – Maersk said it will use a new Bunker Adjustment Factor (BAF) surcharge in order to recover Maersk Line’s cost of compliance with the IMO 2020 sulphur cap. 

Whereas today ships can use fuel with a sulphur content of 3.5 percent, the new sulphur cap will be 0.5 percent, as the regulations come into force on January 1, 2020.

To become compliant shipowners will have to invest in compliant fuels, LNG or scrubber technology. This is expected to lower global shipping’s sulphur emissions by more than 80 percent.

Speaking on the new rules, Vincent Clerc, chief commercial officer, A.P. Moller – Maersk A/S, “The 2020 sulphur cap is a game changer for the shipping industry. Maersk preparations to comply are well underway and so are our customers’ efforts to plan ahead. The new BAF is a simple, fair and predictable mechanism that ensures clarity for our customers in planning their supply chains for this significant shift.”

The regulation will bring increases and uncertainty to fuel costs for shipping. The BAF surcharge is designed to recover increases in fuel-related costs. It will be charged separately from Maersk Line’s freight rate.

According to industry estimates, more than 90 percent of the global vessel fleet will be relying on compliant fuels when the sulphur rules step into force on January 1, 2020. This will also be the case for the Maersk Line fleet, despite a recent investment in a limited number of scrubbers.

The company said earlier it is looking into all possible and available opportunities to ensure we are ready to comply with the 2020 sulphur cap,  that is compliant fuels, LNG and scrubbers.

Using scrubbers is just a part of Maersk’s overall 2020 fuel sourcing strategy to ensure compliance in time.

The new BAF surcharge mechanism consists of 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 as a result of variables like transit time, fuel efficiency and trade imbalances between head haul and backhaul legs.

Combining the two factors give customers full predictability of their costs at any given fuel price both before and after 2020.

To allow customers to familiarise with the changed formula, Maersk Line’s BAF surcharge will be introduced on January 1, 2019.

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