Freight Forwarders Warn BAFs May Be Being Used to Claw Back Revenues Lost to COVID-19

Shipping companies may be being slow to pass on their fuel bill savings to customers. File Image / Pixabay

Logistics industry body the European Association for Forwarding, Transport, Logistics and Customs Services (CLECAT) has called for container shipping companies to pass on the savings seen since the collapse in crude prices a month ago more quickly.

Average very low sulfur fuel oil prices have dropped by $209.50/mt since the end of February, according to Ship & Bunker's G20 index of 20 leading bunker ports, as crude prices collapsed in the face of global supply not being cut fast enough to keep up with evaporating demand.

 "This should be good news for all those who have been hardly hit by reduced volumes and shrinking demand due to the impact of COVID-19 crisis," CLECAT said in a statement on its website Thursday.

"However, the reality is that because of the one-to-two months lag in the calculation of bunker fuel surcharges, cargo owners and freight forwarders have not yet had a relief from the 35% drop in fuel prices of very low-sulphur fuel oil.

"The time-lag of adapting the fuel indexes is usually long when the fuel prices drop and short when the prices rise.

"Currently, with the drop of fuel prices, carriers are tied up to the bunker surcharge indexes based on high fuel prices."

Willem van der Shalk, president of CLECAT, said shipping companies may be using this period to shore up their businesses during the current disruption.

"This gives rise to the suspicion that carriers are using the bunker adjustment factor (BAF) as a revenue-raising tool as well as a cost-recovery during the COVID-19 crisis," he said.

"Whereas freight forwarders understand that carriers are facing increased costs to secure continuity of services, all other parties in the logistics supply chain are facing disruption and fall-outs, not the least our clients, the shippers."