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Tuesday, September 3, 2019 

Drewry Shipping Consultants is helping shippers, forwarders and carriers to get a better idea of costs and data sources as the company launches a low-sulphur bunker price tracker.

There is wide agreement that there will be a large, extra cost for the industry and its users post 1 January 2020. But shippers surveyed by Drewry on the IMO 2020 issue admitted that “data is patchy and confusing” and a high proportion of shippers replied that they were very uncertain about the impact of IMO 2020 on their freight costs. Largely as result of this, Drewry developed an IMO Cost Impact Calculator, but this required guesswork about the future cost of low-sulphur fuel, because there is no established price in the market for the new fuel.

But, says Drewry, this is changing. In July and August, early indications of prices for compliant 0.5% sulphur fuel oil showed that the new fuel costs about 30% more than current, high-sulphur IFO380 fuel at Asian ports which have started selling it. This price is based on actual bunkering transactions for ships which trade with Chinese ports, where the 0.5%S requirement is already implemented. The low-sulphur 0.5%S price in the major port of Singapore is about $560 per tonne (see graph).

However, Drewry says the demand for low-sulphur fuel will increase considerably by November/December and market conditions will be very different then. To assist with revising bunker charges before and after the switch to low-sulphur fuel, Drewry has started a publicly-available Low-sulphur Bunker Price Tracker, which will be updated every quarter and again in December, when many contracts will require data on the new fuel cost.

The chances are that low-sulphur bunker prices will, after increasing in 2020, fall in 2021 and 2022, as the initial price premium decreases. However, the one remaining area of uncertainty is whether carriers will resort to more slow-steaming in the era of more expensive bunkers. Drewry's view is that bunker adjustment factors will soar between 4Q19 and 1Q20, first, and will be very volatile in the first half of 2020.

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