The collapse of marine bunker prices was a surprise, so soon after the rise in costs caused by the IMO 2020 low-sulphur regulation.
The IMO 2020 regulation led to increases of about 35-45% in bunker prices and in indexed fuel surcharges paid by shippers from December or from January.
But these increases have just been reversed, following the crash of oil prices and the 35% fall in Very Low Sulphur Fuel Oil (VLSFO) bunker prices between January (the highest point) and the first half of March (the lowest point, to date) – see table below.
Notes: The average bunker price published here is the weighted average price of bunker fuel in the major ports of Singapore (50% weight), Houston (10%) and Rotterdam (40%) for the relevant period. The bunker fuel prices for each port come from local and global physical bunker suppliers, traders, and brokers
Sources: Drewry Supply Chain Advisors, shipandbunker.com
Nobody had expected this to happen.
The good news is that the fuel part of ocean freight rates paid by shippers will fall and that the underlying bunker costs of shipping lines will also be much lower than previously expected. The extra cost of the IMO 2020 rule will be deferred until the global economy normalises.
Drewry has been asked to provide bunker price forecasts to some shippers who are re-evaluating their 2020 ocean freight budgets in light of the market changes.
Make sure that you keep track of latest VLSFO prices. We also recommend that shippers review their BAF programmes, to make sure that they benefit from the fall in VLSFO prices and have the correct BAF levels.
For any information on the issues raised in this briefing, please contact:
T +44 (0)20 7538 0191
Drewry Supply Chain Advisors, 15-17 Christopher St, London, EC2A 2BS, United Kingdom