FRENCH shipping giant CMA CGM will introduce a quarterly Bunker Adjustment Formula (BAF) for long term contracts starting in January to cope with increased costs arising from the UN's International Maritime Organisation (IMO) low sulphur regulation, which comes into force in 2020.
The BAF revision, based on IFO 380 (intermediate fuel oil) bunker average price or LSFO (low sulphur fuel oil) depending on contract duration, applies to those with a six-month minimum contracts starting in January.
Based on the average tonnage of fuel consumed on Indian subcontinent and Middle East-Red Sea/Asia trade, a sliding scale of surcharges will be applied depending on the fuel price fluctuation.
Standard IFO 380 bunker prices have increased over the last 12 months with a 40 per cent year-to-date compared to 2017 average. On top of the above a new IMO low sulphur regulation will be applicable to all container shipping companies.
The new IMO rule will set a maximum sulphur content threshold of 0.5 per cent for marine fuels over 100 per cent of the sea distance for any maritime services, including between Indian subcontinent and Middle East-Red Sea-Asia.
To be compliant with this new regulation, CMA CGM will use low sulphur fuel (LSFO) and the cost per ton is expected to be significantly higher than IFO 380.
The BAF revision, based on IFO 380 (intermediate fuel oil) bunker average price or LSFO (low sulphur fuel oil) depending on contract duration, applies to those with a six-month minimum contracts starting in January.
Based on the average tonnage of fuel consumed on Indian subcontinent and Middle East-Red Sea/Asia trade, a sliding scale of surcharges will be applied depending on the fuel price fluctuation.
Standard IFO 380 bunker prices have increased over the last 12 months with a 40 per cent year-to-date compared to 2017 average. On top of the above a new IMO low sulphur regulation will be applicable to all container shipping companies.
The new IMO rule will set a maximum sulphur content threshold of 0.5 per cent for marine fuels over 100 per cent of the sea distance for any maritime services, including between Indian subcontinent and Middle East-Red Sea-Asia.
To be compliant with this new regulation, CMA CGM will use low sulphur fuel (LSFO) and the cost per ton is expected to be significantly higher than IFO 380.