Shipper questions 'opaque' quarterly BAF procedure

Questions have been raised over new procedures introduced by two of the major lines serving the SA trades for their standard bunker adjustment factor (SBF) – also better known to FTW readers as bunker adjustment factor (BAF). Maersk Line and Safmarine have converted their bunker adjustments from a monthly to a quarterly basis. “The world price of bunker fuel has fallen steadily since the end of 2014, which should have translated to lower bunker charges to shippers,” said a major container shipper who wished to remain nameless. “But this has not been the case.” And, with the decrease in the bunker prices and the adoption of the quarterly SBF adjustment, our shipper felt that the two lines stood to gain from the variance from what the SBF would have been if it were still calculated monthly. “The variance between the quarterly SBF adjustment for Q1 2015 and monthly SBF adjustment leading into March is quite significant,” he said. “Given the number of containers the lines would move globally during this period, they could stand to gain financially.” The shipper suggested that it was apparent that the SBF was adjusted from the monthly average bunker price on a particular trade. “There appeared to be a two-month lag on the actual month’s average bunker price being applied into the SBF when calculated monthly,” he added. “Given the SBF will only be adjusted quarterly, it can only be determined how the average bunker price factor is calculated if Maersk Line and Safmarine divulge this information.” However, if the quarterly SBF is to be calculated on the previous quarter’s average bunker price factor (trade specific), this will be clearly evident in the SBF adjustments for the second quarter of this year. “For example,” the shipper said, “the SBF on the SA to Northern Europe/UK trade should be adjusted within a range of US$560–US$640 if the Q1 2015 average bunker prices factor remains within US$300-US$340/metric tonne (mt). “This can be monitored. And, if the SBF is not within an acceptable band, then this should be taken up with Maersk Line directly. If Maersk does not co-operate then some form of institutional interception may be warranted.” He also felt that the actual consumption rates to determine the SBF that had been quoted by Maersk Line and Safmarine were still “very opaque”. “Without Maersk disclosing the method to determine the consumption rates,” he added, “there is no way to verify that the SBF is being applied fairly and equitably on each trade lane.” So, FTW’s shipping source said that, in essence, there were a lot of unknown factors as to how the bunker factors were calculated – specifically how the shipping lines derived the average bunker price factors and the consumption rates on each trade lane. And, he added, the opaqueness around the bunker factor exists not only for Maersk Line and Safmarine – but for all shipping lines. “Whether or not shipping lines would fully cooperate in giving an explanation for the calculations of the bunker factor is something that needs to be determined,” the shipper concluded. “Failing which the misnomers will never be resolved, but shippers should very definitely have the right to know.” When asked to comment, FTW received the following statement from head office management on behalf of Maersk and Safmarine: “The standard bunker adjustment factor computation is a manual process. And, in an effort to further simplify and improve customer invoicing quality, the frequency of the review period was changed from monthly to quarterly.” GRAPH - Bunker VS. SBG variation Effective since January 1, Maersk Line and Safmarine no longer review the standard bunker adjustment factor (SBF) every month. Instead they review it on a quarterly basis, starting at the beginning of each quarter (ie, Jan, Apr, Jul, Oct). Illustration of how the change from monthly to quarterly would look for a specific trade.