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IMO 2020 BAF Indexing Toolkit

Drewry and the ESC have defined and published a simplified BAF indexing mechanism and bunker charge guide to help shippers monitor and control bunker charges as shipping lines switch to the more expensive bunkers required under the IMO 2020 low-sulphur regulation.

The aims and principles of the indexing mechanism are:

  • The process of adjusting BAFs is streamlined by agreeing common bunker price measurement periods, common BAF adjustment periods, common fuel reference prices and common indexing formulae.
  • The mechanism includes neither joint “BAF prices” nor joint "baseline BAF charges" – the latter need to be agreed commercially between parties before the start of the shipping contract; it includes only an indexing mechanism.
  • Step 1 of the process is that the shipper and the provider agree on the “baseline” initial bunker charges and the link to the baseline external fuel price (at the start of the contract).
  • Step 2 of the process is that, during the period of the contract, revised bunker charges are calculated based on the previous quarter’s average price for the external fuel reference, and apply contractually to the following quarter (with no need for negotiation).
  • BAF charges are updated once a quarter with a lag time of 1 month to allow parties to update their respective invoicing and purchasing systems.
  • Consideration is given to an additional “interim” BAF adjustment to address the risk of huge volatility in the early prices of the new fuel.

Recent News

Drewry launches new fuel advisory services for shippers and forwarders

Drewry’s freight cost benchmarking and procurement support division, is pleased to announce the launch of a new range of fuel advisory and management services designed exclusively for shippers and forwarders.

Drewry publishes 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 is pleased to announce the publication of its first low-sulphur reference bunker index tracker.

Recent Projects

Market entry strategy for digital 'procure-to-pay' solution

Mastercard wanted to evaluate the readiness of the container freight industry to adopt a value proposition for procure-to-pay automation that would incorporate core Mastercard benefits such as payment guarantees.

e-sourcing global ocean tender management solution: e-SOFS

Drewry Supply Chain Advisors was selected to manage the 2016 global ocean tender for a US-headquartered global producer of technology products combining procurement best practices, the latest technology and freight cost benchmarks in Drewry’s e-Sourcing Ocean Freight Solution (eSOFS).
The first company to provide detailed and regular slow-steaming analysis for the container industry (Container Forecaster)
The first independent consultancy to publish liner schedule reliability rankings in 2005
Access to an exclusive ocean freight cost benchmarking club comparing costs on over 2 million teu of freight for more than $2.3bn of freight spend.
We were the first to publish benchmark container spot market freight rates in 2006.