Worldscale addresses IMO 2020 cap, drops HSFO: Update

Updates throughout

The Worldscale (WS) association told Argus it will base its 2020 flat rate freight calculations upon average prices for compliant bunker fuels and will no longer incorporate high sulphur fuel oil (HSFO). But it said that sourcing a 12 month-average of relevant prices is likely to be a "struggle".

The International Maritime Organization (IMO) will cap the sulphur content of bunker fuel globally at 0.5pc in January 2020, down from 3.5pc today. To comply with the new regulation, tankers will have to burn low sulphur fuels — including 0.5pc grades, marine gasoil (MGO) or LNG — or install abatement technology, such as scrubbers, to continue to use high sulphur fuel oil.

The association has opted not to take into account the scrubber option. It will not include the HSFO price average from 1 October this year to September 2019, for its 2020 flat rate freight calculations. But 0.5pc grades are not likely to be widely available until the second half of 2019, or even the last quarter of 2019, according to some refiners.

Although the association did not specify if and how it will incorporate 0.5pc fuels in its calculations, this could mean it is taking the risk to have less than six-months' worth of pricing data for 0.5pc grades. The bunker fuel element of the WS flat rates released in October each year is calculated on the basis of 12-month averages — running from 1 October to the end of September the previous year — for high sulphur bunkers and low sulphur bunkers compliant with 0.1pc Emission Control Area (ECA) limits.

Worldscale said it is in talks with bunker and data suppliers to secure 2020-compliant bunker prices, and hopes that there will be some activity and price indications before 2020, perhaps from early 2019 onwards.

The association will continue to monitor "availability and pricing of the compliant bunker grades" and is considering the possibility of regularly revise its freight rates from the start of 2020, perhaps on a half-yearly basis, it told Argus.

The ECA-compliant component of the calculation will "continue to be handled in a similar manner as at present," it said.