Bunker Adjustment Factor

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Bunker Adjustment Factor

An increase in a shipping rate as the result of increased oil prices. Because higher oil prices add to expenses, a shipper may set a bunker adjustment factor so as not to reduce profits. Each shipping company sets its own bunker adjustment factor; regulators monitor BAFs so collusion does not take place.
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Container shipping bunker adjustment factors (BAFs) will rocket later this year as the deadline for the mandatory use of new low-sulfur fuels across the global maritime fleet draws closer.
"Contractually, the ability of shippers and providers to adjust their bunker adjustment factors at an appropriate time toward the end of 2019 -- various switching dates can be negotiated -- and at a fair cost is a top priority for the next few months," said the analyst.
Cariou and Wolff (2006) studied the relationship between bunker adjustment factors and bunker prices in Europe and Far East shipping markets.