An Analysis of Bunker Adjustment Factors and Freight Rates in the Europe/Far East Market (2000–2004)

Abstract

This paper focuses on the monthly relationship between the bunker adjustment factor (BAF) and bunker price and between the freight rate and charter rate on the Europe/Far East container trade. It investigates whether a causality relationship can be found between these variables in order to know whether tariffs are mainly driven by cost considerations, as claimed by shipping lines during the last 5 years. Results from VAR and VECR models suggest that a Granger causality does exist. This paper calls for a new way to look at pricing elements in liner shipping and more particularly for shipping conferences, that should focus more for instance on justified/unjustified BAF or rate restoration announcements rather than on a general debate on exemption/abolishment of collective pricing.

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Notes

  1. 1.

    http://www.fareasternfreightconference.com/.

  2. 2.

    Drewry Monthly Report, Various issues June 1999–April 2005, Drewry Shipping Consultant.

  3. 3.

    http://www.harperpetersen.com/.

  4. 4.

    http://www.alphaliner.com/brs-alpha/search.htm.

  5. 5.

    The same could apply to THC, container imbalanced etc.

  6. 6.

    See http://www.harperpetersen.com/ for more details on index calculation.

  7. 7.

    The same research could have been done considering all surcharges announced by the FEFC.

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Appendices

Appendix 1. Reported rate restoration by FEFC in Eastbound and Westbound Europe/Far East trade

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figureb

Appendix 2. Reported BAF by FEFC in Europe/Far East trade

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Cariou, P., Wolff, FC. An Analysis of Bunker Adjustment Factors and Freight Rates in the Europe/Far East Market (2000–2004). Marit Econ Logist 8, 187–201 (2006). https://doi.org/10.1057/palgrave.mel.9100156

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Keywords

  • Liner shipping conferences
  • containers
  • BAF
  • pricing
  • Granger causality
  • regulation
  • FEFC