World’s largest container shipping company Maersk Line is planning to introduce a new fuel adjustment surcharge ahead of the entrance into force of the 2020 sulphur cap.

As explained, the new Bunker Adjustment Factor (BAF) surcharge aims at recovering Maersk Line’s costs of compliance with the global sulphur cap, which mandates the use of fuel with a sulphur content of 0.5% instead of 3.5 %.

Maersk is pursuing the move amid expected increasing fuel costs the industry will face due to the new regulation. The company plans to levy the surcharge separately from Maersk Line’s freight rate.

“We fully support the new rules. They will be a significant benefit to the environment and to human health”, says Vincent Clerc, Chief Commercial Officer, A.P. Moller – Maersk A/S.

“The 2020 sulphur cap is a game changer for the shipping industry. Maersk preparations to comply are well underway and so are our customers’ efforts to plan ahead. The new BAF is a simple, fair and predictable mechanism that ensures clarity for our customers in planning their supply chains for this significant shift.”

The BAF replaces Maersk Line’s Standard Bunker Adjustment Factor (SBF) surcharge and consists of two key elements; the fuel price which is calculated as the average fuel price in key bunkering ports around the world, and a trade factor that reflects the average fuel consumption on a given trade lane as a result of variables like transit time, fuel efficiency and trade imbalances between head haul and backhaul legs.

Maersk Line’s BAF surcharge will be introduced on 1 January 2019.

To become compliant shipowners will have to invest in compliant fuels, LNG or scrubber technology. According to industry estimates, more than 90% of the global vessel fleet will be relying on compliant fuels when the sulphur rules step into force on 1 January 2020. This will also be the case for the Maersk Line fleet, despite a recent investment in a limited number of scrubbers.

Additional cost for the global container shipping industry to comply could be up to USD 15 billion, market estimates show. Maersk Line expects its extra fuel costs could exceed USD 2 billion on annual basis.