Navigating the marine fuel landscape is no easy task for shippers, especially in this time of great uncertainty in the market. Ongoing industry consolidation, larger and more efficient vessels, impact from regulations such as IMO 2020, and lack of a transparent or consistent way to reimburse fuel for ocean freight. Current BAF programs are inconsistent, do not reflect market realities of moving ocean freight, and are not designed to effectively navigate this evolving market place.
|Current Practice||Breakthrough Solution|
|Carriers and shippers utilize BAF programs that do not reflect the true cost of fuel.||Calculation based on journey-specific critical cost components, including fuel price, consumption, and regulations.|
|BAF programs do not provide visibility to consumption and emissions.||Consumption-based approach provides line of sight into accurate measures of financial and environmental impact.|
|Significant variation exists among carrier BAF programs.||Fact-based fuel calculations enable fair and consistent reimbursement practices across the entire carrier base.|
Breakthrough offers a marine fuel solution to combat the distorted practices of the existing marine fuel landscape. Our market-based approach considers 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.
IMO 2020 Sulfur Regulations
The International Maritime Organization (IMO) agreed to reduce the allowable sulfur content of marine fuel from 3.5 percent to 0.5 percent beginning January 1, 2020. The announcement of the significant decrease has and will continue to incite substantial action and investment across the petroleum refining and maritime industries in an effort to comply.
Additionally, current ECA/SECA regulations compounded with the effects of new sulfur requirements affect operations of ocean carriers while creating additional cost. These additional expenses may not be a true reflection of the cost to move your freight to market. As uncertainty in the maritime cargo industry grows, gaining transparency into the true cost of moving goods to market becomes imperative to effectively manage marine fuel spend. Unlike typical BAF programs, the Breakthrough Marine Fuel Management program will include a diversifying mix of fuel types emerging from regulatory changes.
Emergency Bunker Surcharges (EBS)
Historically, container carriers use emergency bunker surcharges (EBS) to offset rising fuel prices. In the first half of 2018, the industry saw several major carriers announced EBS as a result of a steady rise in prices since July 2017. EBS prove that current BAF practices are not capable of keeping up with a dynamic fuel market.
The need for shippers to gain visibility into the marine fuel costs affecting their freight movements will continue to grow into 2020 and beyond. As IMO 2020 looms, fuel price volatility is expected to persist, prompting additional waves of EBS. Breakthrough’s Marine Fuel Management program brings transparency to marine freight, enabling shippers to manage fuel costs and make strategic, data-driven decisions as they navigate today’s challenging marketplace.