In the run up to the 2020 sulphur cap, shippers and forwarders are “starting to get their cheque-books out,” according to consultancy Drewry, to help ocean carriers cover the additional cost of cleaner, low-sulphur fuel
Since early October, the weighted average low-sulphur bunker price for major bunkering ports tracked by Drewry has been US$542 per metric tonne. Drewry said that assuming prices stay at about that level in the next two weeks, the Drewry bunker reference price for the period October-November will be around US$530-550, up about 34-38% from the US$396 price of IFO 380 fuel at the same bunkering ports applicable to the 4Q19 period.
On 4 December Drewry will publish the first Bunker Adjustment Factor reference price based on low-sulphur fuel and in line with its independent BAF indexing mechanism. Using this mechanism, the bunker reference price will change from the previous high-sulphur IFO 380 fuel to the new low-sulphur fuel and affect the new BAFs with effect from January.
Drewry recommends that shippers and forwarders use the average October-November low-sulphur price to set new BAF charges applicable from 1 January 2020.
Several carriers have announced transitional or “emergency” bunker charges applicable from 1 December 2019. However, these will apply only to spot rates and to contracts of less than three months, Drewry noted.
Indeed, to mitigate fuel price volatility and transitional operational expenses, Hapag-Lloyd will introduce an IMO2020 Transition Charge (ITC) for short-term contracts as of 1 December 2019.
As Hapag-Lloyd chief executive officer Rolf Habben Jansen explained “Switching from high-sulphur fuels to the new low-sulphur fuel will inevitably result in higher fuel prices in the short term. Volatility is also expected to increase, particularly during the transition period. Given these circumstances, we will implement the ITC to cope with the additional costs as well as to have a sustainable and transparent method of pricing our services for our customers.”