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BUNKER INDEX :: Price Index, News and Directory Information for the Marine Fuel Industry
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A look at how Hapag-Lloyd's new MFR is calculated

The formula and figures behind next year's bunker-related surcharges.



Image credit: Hapag-Lloyd


Updated on 11 Oct 2018 11:28 GMT

As previously reported, Hapag-Lloyd's new Marine Fuel Recovery (MFR) mechanism will be used to calculate bunker-related surcharges from the start of next year.

The new pricing mechanism has been developed as a result of stricter IMO regulations that will see the new global sulphur cap for compliant fuel lowered from 3.5% to 0.5% in 2020, requiring ships to use more expensive low-sulphur fuel or to install exhaust gas scrubber systems.

In the case of Hapag-Lloyd, the container line says the installation of LNG or exhaust gas cleaning systems will only be feasible for a small percentage of its fleet, so low-sulphur fuel will be used for the vast majority of its vessels.

As a result, Hapag-Lloyd expects the average price it pays for bunkers to rise by $250 per tonne due to the switch from high-sulphur to low-sulphur fuel. With the company's annual bunker bill currently at around $1.7bn (based on fuel consumption of 4.4m tonnes multiplied by its last recorded average price of $385 per tonne for the first half of fiscal 2018), a $250 price jump (to $635 per tonne) would see Hapag-Lloyd's fuel costs rise by more than $1bn, to around $2.79bn.

How the MFR is calculated

Hapag-Lloyd's MFR mechanism is based on market data and derived out of averages for 'market class vessels'.

The MFR is calculated by dividing fuel consumption per tonne by carried TEU and multiplying the result by the fuel price per tonne.

Fuel consumption

According to Hapag-Lloyd, fuel consumption:

- is based on market class vessels for a typical service in the market on a specific trade;

- considers each round voyage at average speed;

- uses the differentiation between days spent at sea and at port.

Fuel price

The fuel price is based on market prices for different fuel types, including HSFO, LSFO 0.5% and LSFO 0.1%.

Carried TEU

Carried TEUs per round voyage are estimated using the nominal size of a market class vessel and utilization based on Clean Cargo Working Group (CCWG) data.

Citing the East Asia - North Europe trade as an example, Hapag-Lloyd explains that:

- 19 different services per week are considered;

- for each services, the average vessel is determined and used in the calculation;

- A market class vessel for this trade is around 14,300 TEU based on vessel size data;

- Utilisation is 70 percent, based on the global average utilisation outlined by CCWG;

- The carried TEU calculation would therefore be 14,300 TEU x 0.7 = 10,010 TEU.

MFR per TEU at different bunker price levels

Hapag-Lloyd has also provided MFR rates for standard dry containers at different bunker price levels for selected trades, based on current market data.

East Asia - North Europe

USD 400 - 182
USD 525 - 223
USD 650 - 264

East Asia - North America East Coast

USD 400 - 221
USD 525 - 271
USD 650 - 321

North Europe - North America East Coast

USD 400 - 152
USD 525 - 168
USD 650 - 184

East Asia - North America West Coast

USD 400 - 117
USD 525 - 144
USD 650 - 171

East Asia - South America West Coast

USD 400 - 210
USD 525 - 271
USD 650 - 333

North Europe - Indian Subcontinent

USD 400 - 115
USD 525 - 140
USD 650 - 164






Related Links:

Hapag to introduce new MFR mechanism to calculate bunker charges
Hapag to test scrubbers and LNG in pilot projects
Hapag sees bunker use climb 0.5m tonnes as average fuel price soars $73
Hapag-Lloyd's Q1 bunker consumption jumps 37% post UASC merger, records $34.3m loss

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