Drewry to track IMO 2020-related bunker charges

LONDON – Maritime and shipping research and consulting firm Drewry has published its first low-sulfur reference bunker index tracker. The move is among a series initiatives aimed at bringing greater transparency to fuel costs resulting from the new IMO 2020 low-sulfur regulation.

Shippers and forwarders have expressed confusion and concern over the timing and transparency of the new charges being introduced by carriers as they transition to the new, low-sulfur fuel standard. 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.

“Our new low-sulfur bunker price tracker is intended to standardize, clarify and simplify the adjustment of Bunker Adjustment Factors between shippers and carriers or forwarders,” said Philip Damas, head of Drewry Supply Chain Advisors. “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.”

Working with the European Shipper’s Council, Drewry already has defined and published a simplified BAF indexing mechanism and bunker charge guide to help shippers monitor and control bunker charges.

“As was anticipated, prices for low-sulfur fuel appear to have settled some 35% higher than the old IFO 380 fuel standard,” said Damas. “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 Dec. 1.

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

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