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IMO2020 to result in 50% hike in bunker costs on Far East-Europe trade lane

Bunker costs per TEU are set to increase by over 50% from January 2020 as the IMO2020 rules force global container lines to switch to more expensive low sulphur fuels. Calculations by MDS Transmodal using its online BAF Calculator suggest that a switch from IFO380 to MGO on a benchmark Far East-Europe service using 18,500 TEU ships would increase the bunker cost/TEU by $62 for the headhaul direction and $39 for the backhaul direction. This level of increase in BAFs will in itself lead to heated negotiations as shippers seek to avoid additional costs and the lines look to protect their bottom lines.

However, results from the BAF Calculator for the Far East-Europe trade lane show there are significant variations around these benchmark results depending on the service used; the increase could be as high as $81 per headhaul TEU and $51 per backhaul TEU. While some lines are installing scrubber systems so they can continue to use cheaper high sulphur fuels, they will need to recoup the cost of their investment and may use the additional cost of burning MGO incurred by their competitors to inform their pricing decisions. Greater transparency in the calculation of BAFs would therefore help shippers to make the most appropriate decisions in the run-up to the IMO2020 deadline.

MDS Transmodal today announced the launch of its BAF Calculator, a new online service from the UK-based maritime and freight transport consultancy. The BAF Calculator allows global shippers and shipping lines to calculate the bunker cost per TEU for each of 154 deep sea container services operating on seven major trade lanes.

“We developed the methodology for Hapag Lloyd’s Marine Fuel Recovery (MFR) mechanism back in autumn 2018”, said Chris Rowland, Managing Director of MDS Transmodal. “But we wanted the whole market to have access to an independent and transparent source of data on bunker costs for containers as the IMO2020 deadline approaches”.

Features and benefits of the BAF Calculator include:

• free access to the bunker cost per TEU for benchmark services on seven major global trade lanes;
• access via a Premium Subscription to the bunker cost per TEU for specific services on the seven trade lanes;
• separate bunker costs per TEU for both headhaul and backhaul directions;
• the ability to change bunker prices for different fuels and oil prices;
• steaming distances in SECAs automatically taken into account;
• uses the methodology that MDS Transmodal developed for Hapag Lloyd’s Marine Fuel Recovery (MFR) mechanism.

Source: MDS Transmodal

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