Maersk Line introduces a new BAF formula
Maersk Line is pleased to introduce a new formula for our floating BAF (Bunker Adjustment Factor). Our aim with the new formula is to provide a simple, fair, and transparent BAF for our customers. In addition, allowing us to share and recover the extraordinary costs provided by the increasing bunker prices.
Bunker prices have tripled within the last three years and bunker costs now constitute nearly half of the total vessel costs, up from 20% ten years ago.
"Today, we only recover approximately 55% of the bunker expenses via BAF surcharges. Naturally, this poses a significant exposure to Maersk Line, and traditionally we have tried to recover this via rate increases," says Vincent Clerc, Vice President for Pacific Services.
"With Maersk Line's BAF formula we will create more transparency, and our customers will experience a simple and fair way of applying BAF. Amongst our customers, we see an increased understanding and acceptance of BAF as a floating mechanism, and our customers increasingly accept that we must share the extraordinary costs in a just way."
The BAF formula We have built the BAF formula on principles that are common in other transportation industries like airlines and parcel services. In these industries, prices and rates reflect fluctuations in fuel prices, and customers accept this as part of doing business in an industry, which is very reliant on fuel.
The formula builds on elements such as fuel consumption, transit time, and imbalances of container flows. However, only changes in the oil price will entail changes in the BAF level. Our customers will therefore only pay the variation in cost, and although the BAF rises when fuel prices climb, they will also benefit from downward trends as the bunker price fluctuates.
Our various trades will implement the new Maersk Line BAF formula separately, beginning the first quarter of 2008. All trades will make announcements on maerskline.com/baf when they transition to the new BAF formula. We expect to complete the rollout by 1 January 2009.
The BAF Calculator To support our new BAF formula, we have developed the Maersk Line BAF Calculator, which is accessible via maerskline.com. With this web tool, our customers and other interested parties can calculate their BAF based on trade and make simulations based on fluctuations in bunker prices. In addition, the BAF Calculator has information on the variables behind our BAF formula, an extensive Q&A, and news on upcoming BAF changes.