(Morristown, N.J.)… As previously communicated, Hamburg Süd switched to low-sulphur marine fuel to comply with the IMO regulations that entered into effect on January 1, 2020. The switch will result in substantial cost increases for ocean shipping. At the same time, we also predicted fuel prices to experience increased volatility.
To allow customers and Hamburg Süd to manage the volatility and cost exposure in a fair and transparent manner, the Hamburg Süd quarterly Bunker Adjustment Factor (BAF) levels will be subject to a monthly review and exceptional trigger if the price of compliant fuel (0.5% sulphur fuel oil), or VLSFO, moves up or down more than 50 USD/metric ton in bunker prices compared to the last review period.
We have seen VLSFO prices increase substantially in recent months and especially in recent weeks. In particular, for a certain period, the VLSFO price in Asia (Singapore) exceeded 700 USD/mt, which is more than 20% higher than the bunker prices used in calculating the previous BAF. As a result, the average increase in January is expected to exceed trigger price of 50 USD/mt.
Consequently, Hamburg Süd will activate the additional monthly trigger defined in our BAF formulas. The new levels will be effective as of March 1, 2020.
We will use Bunkerworld’s fuel price index for 0.5% sulphur fuel oil (VLSFO) for the BAF calculations. The period used for the calculation will be December 26, 2019 to January 25, 2020. The figure used in the comparison will be:
BAF: Average bunker price from August 26, 2019 to November 25, 2019 (537.99 USD/mt)
The increases will be seen across all trades and will range between 50 USD to 200 USD per FFE.
The actual increases per trade will be communicated by end of January.
We thank you for your understanding and support.
Please contact your Hamburg Süd representative with any questions that you may have.