What is Bunker Surcharge (BAF)? Your Complete Guide

What is the Bunker Adjustment Factor (BAF)?

BAF, also known as Bunker Surcharge or Fuel Adjustment Factor, is a surcharge added to shipping costs. It helps shipping companies cover the variable costs associated with changes in fuel prices. This charge is typically calculated based on Twenty-foot Equivalent Units (TEUs) and can vary depending on the trade route.

Simply put, the formula is:

BAF = Fuel Price x Trade Factor

The trade factor takes into account:

• Shipping route
• Vessel direction
• Distance travelled
• Transit time
• Weight of the cargo
• Container size
• Ship design and fuel efficiency

Previously, BAF was standardised by agreements like the Transpacific Stabilisation Agreement (TSA), which used Brent crude oil prices. Since the TSA ended in 2018, carriers have now set their own BAF rates, which are monitored by authorities such as the European Commission.

How IMO 2020 Regulations Changed BAF

In 2020, the International Maritime Organisation (IMO) introduced new environmental regulations to reduce sulphur emissions from shipping. Under the Global Sulphur Cap, ships must limit their sulphur emissions to 0.5% (reduced from 3.5%).

Carriers had three main options to comply:

1. Switch to low-sulphur fuel
2. Continue using traditional fuel, but install exhaust scrubbers
3. Apply for a waiver under certain conditions

Complying with these new standards increased operating costs. As a result, many shipping companies adjusted their BAF rates upwards to recover these expenses, leading to noticeable increases in freight costs worldwide.

How Shipping Lines Are Charging BAF Today

Today, there is no standardised rate for BAF. Different shipping lines calculate and apply these surcharges in their way, sometimes making costs more difficult to predict.

Here are examples of BAF charges from major shipping companies (based on routes from Asia to Northern Europe):

As you can see, BAF charges vary significantly, depending on the shipping line and route.

What to Expect Going Forward

Higher BAF charges have become the new normal as shipping companies work to offset rising costs. However, many industry experts expect pricing models to become clearer and more competitive.

Some ships now use scrubbers or alternative fuels like LNG (liquefied natural gas) to manage their emissions. This could lead to more flexible BAF models in the future, where charges reflect different compliance methods.

For now, it’s important to factor potential BAF charges into your shipping budget, especially when planning international container moves.

Reliable Shipping Solutions at Felixstowe

At Shipping Containers of Felixstowe, we stay current with changes in the shipping industry to help you make informed decisions. Whether buying, hiring, or modifying a container, our knowledgeable team can guide you through every step, including understanding any surcharges that could affect your delivery or project costs.