Navigating the marine fuel landscape is no easy task for shippers, especially in this time of great uncertainty in the market. Ongoing industry consolidation, changing ECA and SECA regulations, disruption in the Transpacific Stabilization Agreement, and lack of a transparent or consistent way to reimburse fuel for your ocean freight creates a volatile environment for shippers. Current BAF programs are inconsistent and do not reflect market realities of moving your ocean freight.
|Current Practice Distortion||Implications of Distortion||Eliminating Distortion|
|Most Bunker Adjustment Factor (BAF) programs use index-based prices or averages.||Critical cost components are not accounted for including fuel price, consumption, and regulations.||Capture movement-level data for fuel price, consumption, and relevant regulations in order to reimburse your carriers accurately.|
|Significant variation exists among carrier BAF programs for the same trade lane.||On one individual lane, you currently pay a variety of prices for the same movement, none of which are directly aligned to a real fuel cost.||Use fact-based fuel calculation to enable fair and consistent reimbursement practices.|
|Typical BAFs are not updated for time or specific geographies of a movement.||Ocean freight rates contain fuel price risk premiums.||Separate freight from fuel and reimburse for fuel according to relevant market prices and fuel consumed.|
Breakthrough®Fuel offers a marine fuel solution to combat the distorted practices of the existing marine fuel landscape. Our market-based approach takes into account fact-based consumption, distance and transit time, actual trade-lane fleets, quantified ECA/SECA exposures, accurate speeds, and dynamic marine fuel pricing to ensure you have the proper visibility into your network to make effective business decisions.
Transpacific Marine Fuel Costs
Prior to July 1, 2017, the Transpacific Stabilization Agreement (TSA) had been publishing two quarterly benchmark fuel costs (Asia to the US West Coast and Asia to the US East Coast) that were used as a fuel reimbursement mechanism for a number of ocean freight contracts. As of July 1, 2017, the TSA has stopped publishing these reference numbers. As a result, Breakthrough®Fuel will publish six reference fuel costs for the Transpacific trade lane as an alternative to the previous TSA methodology.
The Breakthrough®Fuel methodology is based on three Asian sub-regions: Northeast Asia, East Asia, and Southeast Asia. These sub-regions were identified as a result of the analysis of ocean shipments from Asia to North America. These reference costs can serve as guidance between now and the end of the current ocean contracts that relied on the TSA methodology. In addition to these reference costs, Breakthrough®Fuel offers a Marine Fuel Management Solution specific to each individual shipper that can provide lane-level fuel cost calculation. Fill out the form below or contact us to learn more about this solution.
For each of the six trade lanes, we calculate the benchmark fuel cost based on the actual trade lane fleet, average speed, distance, consumption, and high- and low-sulfur marine fuel prices at regional bunkering hubs. These reference costs will be updated on a weekly basis.
For the week of July 24, 2017:
|Origin||Destination||Fuel Cost per TEU|
|Northeast Asia||North America West Coast||$90.98|
|Northeast Asia||North America East Coast||$160.34|
|East Asia||North America West Coast||$111.20|
|East Asia||North America East Coast||$149.18|
|Southeast Asia||North America West Coast||$102.20|
|Southeast Asia||North America East Coast||$136.17|
Changing ECA & SECA Regulations
Beginning in 2015, vessels entering the Emission Control Area/Sulfur Emission Control Area (ECA/SECA) waters are required to change from high-sulfur (IFO380) to low-sulfur (LS MGO) marine fuel. On average, LS MGO price premium is 60-70% and is expected to grow.
Current ECA/SECA regulations and changes pending in 2020 affect operations of ocean and sea carriers and drive up accessorial charges. These accessorial charges are not a true reflection of the cost required to move your freight through these markets and result in price distortion and lack of transparent data. Unlike typical BAF programs, the Breakthrough®Marine Fuel Program calculates dynamically changing ECA/SECA fuel costs based on equipment used, vessel speeds, and low-sulfur MGO fuel prices.
Our program accounts for each segment of your route affected by ECA/SECA regulations.