Drewry – The time for higher BAF charges has come

November 18, 2019

With the enforcement date of the IMO 2020 low-sulphur regulation now only 6 weeks away, shippers and forwarders are starting to get their cheque-books out to help ocean carriers cover the additional cost of the cleaner, low-sulphur fuel.

On 4 December Drewry will publish the first Bunker Adjustment Factor reference price based on low-sulphur fuel and in line with our 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.

What are the numbers? Since early October, the weighted average low-sulphur bunker price for major bunkering ports tracked by Drewry has been $542 per metric tonne. So, 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 $530-550, up about 34-38% from the $396 price of IFO 380 fuel at the same bunkering ports applicable to the 4Q19 period.

Drewry recommends that shippers and forwarders use the average October-November low-sulphur price to set new BAF charges applicable from 1 January 2020.