WTSA introducing “simpler” BAF formula

WTSA introducing “simpler” BAF formula

WTSA introducing “simpler” BAF formula

The Westbound Transpacific Stabilization Agreement said Tuesday it will introduce a “simpler, more transparent” formula for calculating bunker fuel surcharges in the U.S. to Asia trade in response to concerns raised by shippers.
   WTSA carriers intend to implement the new formula in their tariffs and service contracts for dry cargo, effective Oct. 1. A separate guideline covering refrigerated cargo is being finalized and will be announced shortly, to take effect on Nov. 1.
   WTSA said the new formula will eliminate a number of variables that made the existing formula more complex and will distinguish between bunker fuel-related costs for West Coast port-to-port and East Coast all-water services. It will also narrow the threshold fuel prices that trigger surcharge increases and the amount of those increases “to ease the impacts of monthly adjustments”.

Conrad

   Brian M. Conrad, WTSA executive administrator, said, “The new formula is a significant departure from how WTSA has calculated its bunker surcharge guideline in the past. Container lines face an urgent need to recover fuel costs that have more than doubled in 18 months. In turn, customers are being asked to absorb a sizable increase in their freight costs, and carriers recognize that this will require an easily justifiable, transparent process.”
   WTSA said the new bunker surcharge formula will work as follows:
   ' By tracking a single marine fuel, IFO 380, which accounts for 98 percent of fuel-related costs.
   ' Eliminating the weighted average of weekly prices at 11 load ports and instead using a straight average of Hong Kong and Los Angeles prices for the West Coast, and Hong Kong and New York prices for the East Coast surcharge.
   ' Using fuel price data for the three ports from the publicly available Web site www.bunkerindex.com.
   Aside from fuel price changes, other factors that will be used to measure the fuel cost impact include:
   ' A vessel’s effective capacity.
   ' Westbound allocation of deadweight capacity after eastbound empty repositions.
   ' Maximum capacity for loaded containers before reaching a ship's weight limit.
   ' Daily fuel consumption.
   ' One-way steaming time (excluding time in port).
   The averages for the above components vary for West Coast and East Coast services, but are constant for each, WTSA said.
   “A simple calculation adjusts effective capacity to allow for the deadweight impact of empty returns; multiplies the fuel price (per ton) by consumption (tons per day), then by transit time (steaming days); and finally dividing by the maximum number of loaded containers by weight for the ship's effective capacity, to produce an average fuel cost per sailing per 40-foot container (FEU),” the carrier agreement explained.
   Under the new formula, the weighted average fuel price of $689.60 per metric ton — developed under the current formula for August — translates into a bunker fuel surcharge of $767 per FEU from the West Coast, and $1,515 per FEU from the East Coast.
   Conrad said that with separate calculations for West Coast and East Coast services shippers will inevitably see differences in their surcharges under the new formula versus the old one. “The carriers' focus was to make the formula as simple and transparent as possible, and to reflect as accurately as possible the fuel costs passed through depending on routing,” he said.
   The WTSA’s Web site www.wtsacarriers.org will soon include a fact sheet detailing the new bunker surcharge formula, with a matrix that translates current average fuel prices to per container surcharge levels.
   The 10 members of the WTSA are APL, COSCO Container Lines, Evergreen Line, Hanjin Shipping, Hapag Lloyd, Hyundai Merchant Marine, “K” Line, NYK Line, Orient Overseas Container Line and Yang Ming. ' Simon Heaney