“Following implementation of the IMO 2020 low-sulphur rule change we have already seen extreme variations in fuel charges between carriers on the same tradelane, for similar ship sizes – even shared vessels,” said Philip Damas, head of Drewry Supply Chain Advisors. “On the Asia-to-US East Coast route, for example, across a sample of five carriers, we saw some had increased their BAFs by as much as 40% in 1Q 2020, whereas others by just 15%.”

Drewry has been working closely with shippers and industry representative organisations such as the European Shipper’s Council (ESC) in recent months on a number of initiatives aimed at improving fuel cost transparency and contractual practices, such that shippers can reduce their exposure to excessive BAFs and have greater control over and understanding of the fuel portion of ocean freight rates.

“We anticipate confusion over the new charges introduced by carriers will continue for some months yet as the market fully adapts to the new fuel standard,” said Mr Damas. “By helping review their existing processes and implement a standard BAF mechanism, covering measurement and adjustment periods, fuel prices and index formulae, we believe shippers and forwarders can gain both clarity and more control over fuel prices – essential pre-requisites to achieving more competitive and successful outcomes from their carrier negotiations.”

Source: Drewry