TSA -- [ Bunker (Fuel) Charges Fact Sheet ]

TSA Bunker Fuel Charge: Covering the High Fixed Cost of Marine Fuel

Fact Sheet

Transpacific container shipping lines have assessed some form of separate marine bunker fuel charge in the Asia-to-U.S. trade lane since 1990. Such surcharges, added onto base freight rates, help offset rising marine bunker fuel and diesel oil prices —
a significant portion of overall carrier operating costs.

Freight rates are highly cyclical, subject to constantly changing market and competitive conditions, while fuel is a major fixed cost component of a voyage. Even slight increases in marine fuel prices can produce dramatically higher voyage costs for a fixed-day scheduled service, particularly on longer Pacific routes. Lines need some assurance that, even during periods of depressed rates, major operating cost components such as fuel will be adequately recovered.

The solution is a separate, transparent charge, added onto base freight rates, that tracks world bunker fuel prices and then applies a weighted average formula to recover the cost impact of price fluctuations on carrier operations. The formula reflects fuel consumption patterns across the TSA membership (where fuel is purchased and loaded, vessel size, route configurations, sailing speed and transit time, linehaul and feeder ship fuel costs, cargo mix, etc.). The charge is allowed to float with fuel prices, and is adjusted on a monthly basis.

In recent years the Bunker Fuel Charge has been revised to create a single, simplified formula and charge for all Asia origin points, broken out from base freight rates. The formula has also been updated to reflect changes in Pacific load ports used by member carriers, and in the full relative cost impacts of CS 380 marine fuel and marine diesel oil (MDO) used in shoreside cargo handling operations.

As the top table on the right shows, monthly bunker charge adjustments are timed to give the transpacific market a minimum 30 days' notice prior to the monthly effective date. As a result, the charge for a given month reflects average fuel costs posted 1-2 months earlier.

Visitors to this web site will find, elsewhere in this "Ancillary Charges" section of the web site, both the current bunker charge and the scheduled adjustment for the coming month. In addition, a bunker charge calculator page posts weekly world fuel prices and provides a table for users to forecast upcoming adjustments by converting average weekly prices to monthly bunker charge levels.

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CALCULATING THE BUNKER CHARGE

Carriers and their customers can follow a relatively simple process for calculating and forecasting Bunker Fuel Charge adjustments:


	*1. Determine the reporting period.* To determine the Bunker Fuel Charge for the start of any month, determine the weighted weekly average price for the periods as indicated below:
	Effective Date of Charge	Reporting Period
	Jan 1 Feb 1 Mar 1	Preceding Nov Preceding Dec Preceding Jan
	Apr 1 May 1 Jun 1	Preceding Feb Preceding Mar Preceding Apr
	July 1 Aug 1 Sep 1	Preceding May Preceding Jun Preceding Jul
	Oct 1 Nov 1 Dec 1	Preceding Aug Preceding Sep Preceding Oct


	*2. Track weekly marine fuel prices.*
	The charge is to be based on a weekly weighted average of marine fuel prices, which can be found in the Platts Bunker Wire, a subscription-based service located at www.platts.com Platts is used because it is the only worldwide service that tracks nearly all of the load ports used in calculating the Bunker Charge.


	*3. Develop the weighted average fuel price by load port and fuel type.* Look up the weekly prices for CS 380 bunker fuel and marine diesel oil (MDO) at the following ports weighting them as shown to take into account their actual use by carriers:
	Busan	19.79%
	Los Angeles	15.02%
	Singapore	17.34%
	Hong Kong	13.4%
	Seattle	9.1%
	New York	6.22%
	Oakland/San Francisco	5.37%
	Rotterdam	5.02%
	Kaoshiung*	4.5%
	Shanghai	1.52%
	Savannah/Charleston	1.5%
	Japan	1.22%
	* Platts does not provide fuel cost information for Kaoshiung, and so for Taiwan, the price info direct from the China Petroleum Corp, at www.cpctmtd.com.tw (go to "Fuel Oil Price", then to Marine Oil, then look at the Kaoshiung contract rates column). Next, weight the CS 380 price by 98.71% and the MDO price by 1.29%, reflecting their relative impacts on carrier costs. If the Platts index for a particular port shows a range, take the mid point. Example: If the index for a given week shows:
	Los Angeles 380 CST MDO	$100-110 $220-230
	Then the weighted price for Los Angeles for that week will be:
	380 CST MDO	$105 x 0.1502 x 0.9871 = $15.567 $225 x 0.1502 x 0.0129 = $0.435
	Total weighted price for Los Angeles for that week = $15.567 + 0.435 = $16.002 per ton. Do the same calculation for the other ports. The total of the weighted price for all 12 ports together will give the weighted average fuel price for that week.


4. Calculate the Bunker Charge Once the weighted price for the period is determined, apply it to the following index**:
Average Weighted Price for the Period (US$/ton)	Bunker Charge for next month (US$)
	AQ	20’	40’	HC40’	45’
Less than $80.00	0	0	0	0	0
$80.01-100.00	0.1	4	5	6	6
$100.01-120.00	1	40	50	56	63
$120.01-140.00	2	76	95	107	120
$140.01-160.00	3	112	140	158	177
$160.01-180.00	4	148	185	208	234
$180.01-200.00	5	184	230	259	291
$200.01-220.00 $220.01-240.00 $240.01-260.00 $260.01-280.00 $280.01-300.00 $300.01-320.00 $320.01-340.00 $340.01-360.00 $360.01-380.00 $380.01-400.00 $400.01-420.00 $420.01-440.00 $440.01-460.00 $460.01-480.00 $480.01-500.00 $500.01-520.00 $520.01-540.00 $540.01-560.00 $560.01-580.00 $580.01-600.00 $600.01-620.00 $620.01-640.00 $640.01-660.00 $660.01-680.00 $680.01-700.00 $700.01-720.00 $720.01-740.00 $740.01-760.00	6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33	220 256 292 328 364 400 436 472 508 544 580 616 652 688 724 760 796 832 868 904 940 976 1012 1048 1084 1120 1156 1192	275 320 365 410 455 500 545 590 635 680 725 770 815 860 905 950 995 1040 1085 1130 1175 1220 1265 1310 1355 1400 1445 1490	309 360 411 461 512 563 613 664 714 765 816 866 917 968 1018 1069 1119 1170 1221 1271 1322 1373 1423 1474 1524 1575 1626 1676	348 405 462 519 576 633 690 747 804 861 918 975 1032 1089 1146 1203 1260 1317 1374 1431 1488 1545 1601 1658 1715 1772 1829 1886
** The index is based on an averaging of carrier costs per container per voyage assuming specific fuel price levels. It reflects both individual carrier assessments of fuel as a percentage of total voyage costs, and independent analysis of carriers’ fuel costs relative to what they have been able to recover through charges. It factors in differences in vessels, port rotations, transit times, service parameters and other factors affecting fuel consumption, and uses an average in the interest of uniformity and price predictability.

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