FAQ

Questions and answers about Maersk Line’s BAF formula


Q: Why does Maersk Line has its own Bunker Adjustment Factor calculation?

A: Maersk Line works as an independent carrier, with their unique deployments, consumption and transit time and subsequently their own Bunker costs and we believe that this calculation will better reflect the actual cost picture.

Q: Why doesn’t Maersk Line apply conference BAF any more?

A: Conferences related to European trade has expired in 2008 thus providing Maersk Line an opportunity to provide a more transparent and simple-to-use bunker calculation to their customers.

Q: What are BAF and SBF?

A: BAF stands for Bunker Adjustment Factor which is used as a hedge to protect both our customers and Maersk Line against increases and decreases in bunker prices for the duration of the contract. BAF levels are changed every month based on changes in bunker prices. SBF is Maersk Line’s new, updated formula for calculating BAF. We call it Standard BAF (SBF).

Q: Why does Maersk Line have two Bunker Adjustment Factors?

A: The Standard Bunker Adjustment Factor – SBF is the preferred calculation method as of 1st Jan 2012. The old Bunker Adjustment Factor – BAF will be honored in all existing contracts until they expire.

Q: What is the main difference between BAF and SBF?

A: SBF formula has the below difference with BAF formula:

1.    It takes into consideration the effects of slow steaming in the trades that have slow steamed.

2.    It includes Low Sulphur fuel costs in trades where it is used

3.    The consumption, transit time and imbalance are based on actual Maersk numbers as opposed to industry standard as was in BAF.

4.    It does not include Base Bunker Element like BAF did.

In short it is simpler and more transparent.

Q: What will be the new tariff?

A: SBF levels will be the new tariff, which is used for tariff bookings. BAF will be zeroed out in the tariff.

Q: Will all your routes use the same formula?

A: Maersk Line is going to apply the same formula to all trades.

Q: What is the base bunker element?

A: The base bunker element is determined by criteria that differ from trade to trade. Some use an average bunker price monitored in relevant ports during 2007 and some use the old conference BAF. At this specific bunker price level the BAF is 0 and this base bunker element is incorporated into the ocean freight rate. In other words, this is the part of the bunker cost which is assumed by the carrier. The trades will continue to monitor the bunker prices on a monthly or quarterly basis. In light of negative Base freight in the industry, this however does not apply anymore.

Q: How will Maersk Line announce its changes to BAF and SBF levels?

A: Changes will be announced through maerskline.com/baf. We will also continue to send out customer advisories and updates to all our subscribers. You can sign up for subscriptions on:

http://www.maerskline.com/subscription

Q: If Maersk Line uses the same formula globally, why is the input (variables) different?

A: We use the same form for each trade to maintain consistency. The variables may differ from trade to trade because of different vessel types, different consumption, headhaul to backhaul ratios, utilisation etc. This means that the SBF for each trade will match Maersk Line’s variable bunker fuel cost.

Q: What are the benefits of the new SBF formula compared to the old BAF formula?

A: The new SBF is straight forward. There are no ‘constants’ such as Base Bunker element – it is purely based on updated bunker prices, consumption figures, transit times (weighted by volume in the various trades) and imbalance numbers. It is a more transparent and simple way to hedge customers and Maersk Line against bunker price changes during the contract period – nothing else.

Q: Will all trades convert to the new SBF on 1 January, 2012?

A: All trades except for the Pacific trade (Asia to/from North America) will use SBF on 1 January, 2012. Pacific trade will convert on 1 May, 2012 following the normal contracting period for that trade.

Q: When will the “constant” in your formula be updated?

A: The “constant” is indeed "constant" and will not change unless significant changes are made to the rules (e.g. slow steaming). We intend to make an annual review of the constants and formula and will of course justify any alterations we make.

Q: How do I as a customer benefit from the new formula?

A: The benefit to the customer is that the price of transportation is adjusted to reflect the actual cost of fuel at all times, as opposed to a scenario where the carrier has to cover the unforeseen up front. In the latter case the customer will usually pay a premium. 

Maersk Line will provide a transparent, simple, and fair formula which applies to all trades. With the introduction of the Maersk formula, our customers will experience a fair and equitable way of applying Bunker Adjustment Factor.

Q: In which quantum will the changes be made, will you round to the nearest USD 5/40’?

A: The minimum change, up or down, will be increments of USD 5/20' and USD 10/40'

Q: Why is reefer SBF higher than dry SBF?

A: Reefer containers need power in order to maintain the temperature required for the cargo transport over the duration of transit. Therefore, they consume more fuel than dry containers and SBF levels reflect this difference.

Q: The new SBF is said to reflect slow-steaming, so why is SBF in some trades higher than old BAF?

A: SBF does reflect slow-steaming and the reduced consumption per TEU in trades where slow-steaming has been introduced. The main reason for higher SBF compared to the old BAF in some trades is the removal of the obsolete Bunker Base element. If old BAF and new SBF consumption figures are compared like-for-like, SBF will show a reduction.

Q: What do you use as "calculation date" when applying SBF to a shipment?

A: The SBF in the Maersk Line tariff will be applied based on the date when the last container in a shipment is gated in. In other words, the SBF will strictly follow the calculation date of the ocean freight price.

Q: How do you determine the monitoring period?

A: It depends whether the SBF is changed monthly or quarterly. Follow the links to see examples of how the data is sourced over a predefined period before the SBF becomes valid.

Q: Do you monitor bunker prices on a daily basis?

A: Yes, the monthly monitoring period runs from the 26th in one month to the 25th in the next month. During this period we monitor both 380 and Low Sulphur bunker prices (where applicable) on a daily basis and then take the average of all figures in order to calculate the new BAF level.

Q: Which cut-off date is used when applying SBF to a shipment?

A: SBF levels are calculated based on average bunker prices 2 months before. As example, the SBF level for May will be announced on 31 March (to give 30 days’ notice), and is based on average bunker prices from 26 February to 25 March.

Should you require further information please contact your local Maersk Line office » Click here