November 21, 2014
Changes to Eastbound and Westbound Container Fuel Charge Effective January 1st, 2015
Dear Valued Customer,
As we informed you approximately one month ago, Westwood will be changing its application of the Eastbound and Westbound Container Fuel Charge, effective January 1st, 2015.
Westwood Shipping Lines fully complies with all environmental regulations and requirements related to our operations. New regulations regarding the use of Low Sulfur Marine Gas Oil (LSMGO) within the North America Emission Control Area (NAECA) will come into effect on January 1, 2015.
Carriers are required to switch to fuel with a sulfur content of 0.1 percent on Jan. 1, 2015, from the current 1.0 percent limit, while operating within the Emission Control Area (ECA) in the North America zone in which we serve.
Westwood has modified its Eastbound and Westbound Container Fuel Charges to better reflect the combination of fuels that are required for use in transport of cargo. As a result, effective Jan 1st 2015 we will utilize a separate table that reflects the use of IFO 380 in non-NAECA (Base Bunker Charge), and a new table to reflect the additional cost for use of Low Sulfur Marine Gasoil (LSMGO) within the NAECA.
Combined, the two elements (Base Bunker + Low Sulfur) will become the Ocean portion of our FAF. The calculation of the Intermodal portion of FAF will remain unchanged.
BASE BUNKER CHARGE — IFO 380
The Base Bunker Charge is adjusted quarterly and is based on a 13-week reporting period that ends approximately 30 days before the effective date of the next period. Adjustment dates are January 1; April 1; July 1; October 1.
Prices are developed independently by Bunkerworld, and reflect the average bunker prices for IFO 380 at Hong Kong and Los Angeles. This information can be found on www.bunkerworld.com.
A simple average of the 13-weeks posted average prices will be used to arrive at a quarterly average price. Using the table provided, this price will determine the Base Bunker Charge to be applied in the following period.
LOW SULFUR COMPONENT � LSMGO
The Low Sulfur Component of the Container Fuel Charge is also adjusted quarterly and is based on a 13-week reporting period that ends approximately 30 days before the effective date of the next period. Adjustment dates are January 1; April 1; July 1; October 1.
Use of this component is designed to help recover the difference in costs associated with burning premium low sulfur fuel while in the North American Emissions Control Area (NAECA). The table used for determining this element of the Bunker Charge is based on the difference in price for LSMGO as compared to IFO 380 which is used in the Base Bunker Charge.
Prices are published independently by Platts Bunkerwire, and reflect the average reported bunker prices for Marine Gasoil at Seattle and South Korea. This information can be found through subscription to Platts Bunkerwire by accessing www.platts.com.
A simple average of the 13-weeks posted average price differential will be used to arrive at a quarterly average price differential. Using the table provided, this price differential will determine the Low Sulfur Component of the Container Fuel Charge to be applied in the following period.
Note - At this time we believe the price for Marine Gasoil provides the most accurate available price for developing this component of the Bunker Charge. Fuel used in the NAECA is required to meet 0.1% sulfur content. Development of this fuel source is ongoing, and we expect that in the coming months there will be a more widely used benchmark that more accurately reflects the prices for fuel used in the NAECA. When this resource becomes available, we may change our reporting.
Below is an example of how these two tables are used to develop the Ocean Bunker Charge portion of the FAF:
1) Assume the 13-week average price for IFO-380 for the reporting period of June 1st through August 31st = $618.00 / MT
a. Using the Base Bunker Charge Tables, locate the fuel price range $600.01 - $620
b. Based on this line, locate the Eastbound or Westbound Base Bunker Charge to be applied in the following period:
i. Eastbound = $400 PC20; $500 PC40; $562 PCHC
ii. Westbound = $492 PC20; $615 PC40/HC; $865 PCRF
2) Assume the 13-week average price for LSMGO for South Korea and Seattle for the reporting period of June 1st through August 31st = $975.00 / MT
a. Calculate the average Low Sulfur price differential
i. $975.00 / MT (LSMGO) - $618.00 / MT (IFO380) = $357.00
b. Using the Low Sulfur Differential Bunker Tables, locate the fuel price differential range of $350.01 - $370
c. Based on this line, locate the Eastbound or Westbound Low Sulfur Charge to be applied in the following period:
i. Eastbound = $35 PC20; $43 PC40; $48 PCHC
ii. Westbound = $62 PC20; $75 PC40/HC; $105 PCRF
3) Combine the Base Bunker Charge and the Low Sulfur Charge to determine the Bunker Charge for the new period (using the example above)
a. Eastbound = $435 PC20; $543 PC40; $610 PCHC
b. Westbound = $554 PC20; $690 PC40/HC; $970 PCRF
The Base Bunker Charge and Low Sulfur Charge that combine to make up the Bunker Charge will be posted by December 1st, 2014 for application on January 1st, 2015.
If you have any questions or require further assistance, please contact your Westwood Sales Manager or Customer Service Specialist at 1-800-220-9752.