Drewry Releases First Low-Sulphur Reference Bunker Index Tracker
The publication of the Drewry’s first low-sulphur reference bunker index tracker has been announced. This is a part of the various initiatives that aim at better transparency of fuel costs due to the low sulphur regulations of IMO 2020.
Recently, the concerns about the timing and transparency of the new charges that carriers introduce as they move from IFO 380 to new, low sulphur fuel standard have been expressed by shippers and forwarders.
The low sulphur BAF index of Drewry that will be quarterly updated will help determine BAF charge changes in the entire life of a contract by a simple indexing mechanism.
“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,” 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.”
After working with the European Shipper’s Council (ESC), a BAF indexing mechanism and bunker charge guide has been defined and published by Drewby so as to help shippers monitor and control bunker charges that was made by the ESC-Drewry IMO toolkit reference group who were supposed to gather views and practices on topics related to the IMO 2020 low sulphur fuel.
“As was anticipated, prices for low-sulphur fuel appear to have settled some 35% higher than the old IFO 380 fuel standard,” said Mr 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 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,” continued Mr Damas. “We will continue to closely monitor and report future developments.”
Through membership of the Benchmarking Club of Drewry, the exporters and importers can avail average contract bunker charges by tradelane that is updated once a month by Drewry.