Thursday, December 5, 2019

Maritime Advisory Group Introduces Low Sulphur Fuel Index Tracker

Variable Bunker Costs Post Cap Addressed
Shipping News Feature

WORLDWIDE – As part of a series of initiatives aimed at bringing greater transparency to fuel costs resulting from the new IMO 2020 low-sulphur regulation, maritime advisory, statistics and research group Drewry has published its first low-sulphur reference bunker index tracker.

Drewry says that in recent months, both shippers and forwarders have expressed confusion and concern over the timing and transparency of the new charges being introduced by carriers as they transition from IFO 380 (intermediate fuel oil) to the new, low-sulphur fuel standard. Others have complained about what they consider unfair Bunker Adjustment Factor (BAF) charges.

Drewry’s new low-sulphur BAF index, which will be updated quarterly, provides a simple indexing mechanism to help determine changes in BAF charges during the lifetime of a contract. Philip Damas, head of Drewry Supply Chain Advisors, commented:

“Our new low-sulphur bunker price tracker is intended to standardise, clarify and simplify the adjustment of Bunker Adjustment Factors (BAFs) between shippers and carriers or forwarders. By streamlining the process and agreeing common bunker price measurement periods, BAF adjustment periods, fuel prices and index formulae, we hope to bring much needed clarity to the challenges presented by the regulatory change.

“As was anticipated, prices for low-sulphur fuel appear to have settled some 35% higher than the old IFO 380 fuel standard. Although temporary and transitional bunker charges were expected to apply to just spot rates and to contracts of less than three months, it is clear that some shippers with annual ocean freight contracts have been requested by their carriers to start paying the new IMO BAF from 1st December.

“While uncertainty remains in the market, some carriers may choose to reduce their base rates and charge the ‘full BAF’ in their next contracts. We will continue to closely monitor and report future developments.”

Working with the European Shipper’s Council (ESC), Drewry has already defined and published a simplified BAF indexing mechanism and bunker charge guide to help shippers monitor and control bunker charges, which was drawn up by the ESC-Drewry IMO toolkit reference group, who were tasked with gathering views and best practices on IMO 2020 low-sulphur fuel-related topics.

Through membership of Drewry’s Benchmarking Club, exporters and importers have access to average contract bunker charges by trade lane, updated by Drewry once a month.