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Drewry publishes its first low-sulphur BAF reference price


As part of a series of initiatives aimed at bringing greater transparency to fuel costs resulting from the new IMO 2020 low-sulphur regulation, Drewry has announced the publication of its first low-sulphur reference bunker index tracker


Both shippers and forwarders have expressed confusion and concern in recent months 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. 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-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


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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.”


Simplified BAF indexing Working with the European Shippers’ 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. This was drawn up by the ESC-Drewry IMO toolkit reference group, which was tasked with gathering views and best


practices on IMO 2020 low-sulphur, fuel-related topics. “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 1 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 Drewry’s


Benchmarking Club, exporters and importers have access to average contract bunker charges by tradelane, updated by Drewry once a month. Source: Drewry


January 2020


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