Conflicts rise over imposition of BAF in Korea/Japan trades

With concerns mounting over the out-break of war in Afghanistan, shippers and shipping companies are conflicting with respect to increased rates.

The Korea Nearsea Freight Corporation (KNFC), a discussion forum for shipping companies in Korea and Japan trades, revealed that it would raise the Bunker Adjustment Factor (BAF) on container cargoes in the trade to 55 dollars from the current 20 dollars.

The Korea Shipper's Association (KSA) immediately resisted the increase saying that they couldn't come to terms with the KNFC over the BAF increase in the wake of increasing insurance rates and unstable oil prices due to the out-break of war in Afghanistan.

"Insurance rates have been hiked for shipping companies that operate vessels in the Middle East and underwriters are charging war premiums in the Middle East, a war risk area. However, Dubai oil, unstable after the out-break of war, stabilized at 19 dollars per barrel, and is gradually decreasing. The current oil price fell by more than a third from January 2000 when the BAF was introduced in Korea / Japan trades. In spite of this, the KNFC has very weak grounds for a 250% BAF increase," said the KSA.

"Shrinking consumption is spreading throughout numerous countries and that in turn has lead to cutbacks in imports. This decrease in demand has cast a dark cloud over our exports. It is improper for the KNFC to increase the BAF on the back of regional wars," said the association.