IMO 2020 Fuel Legislation: Update

 From 1st January, 2020, a global regulation will come into force changing the type of fuel all shipping lines must use.

The aim of the regulation is to reduce air pollution from ships. Whereas today ships can use fuel with up to 3.5% sulphur content, the new global sulphur cap will be 0.5%. Currently the cost of 0.5% sulphur fuel is higher than that of the present fuel used by the industry. This additional shipping cost will impact on fuel surcharges as from December 2019 as the ocean carriers begin to purchase this fuel in order to be compliant on 1st January 2020.

Bunker Adjustment Factor (BAF)

 In 2019, the ocean carriers have used the price of our current fuel – IFO 380 with 3.5% sulphur content to calculate our BAF surcharge. From 1st January 2020, the carriers are indicating the BAF calculation will be based on the fuel price for 0.1% sulphur content Marine Gas Oil, less a standard deduction of USD 50 per ton. Currently Marine Gas Oil is the only fuel type with a publicly available index for tracking global price movements.

IMO 2020 Fuel Legislation: Update

From 1st January, 2020, a global regulation will come into force changing the type of fuel all Ocean carriers must use. The aim of the regulation is to reduce air pollution from ships. Whereas today ships can use fuel with up to 3.5% sulphur content, the new global sulphur cap will be 0.5%.

This additional shipping cost will impact on the carrier’s fuel surcharges as from December 2019 as they begin to purchase this fuel in order to be compliant on 1st January 2020.

Environmental Fuel Fee (EFF)

Effective 1st December 2019, carriers are planning to introduce an Environmental Fuel Fee. This EFF will be calculated by multiplying a specific trade factor by the price spread between current fuel types and new, low sulphur compliant fuel. The EFF tariffs will be reviewed monthly and only adjusted if the price of low sulphur fuel has changed by USD 50 per ton.

The EFF tariffs that are planned to come in to effect from 1st December 2019 will be announced at the end of October 2019 and will be based on the latest relevant price information.

We will further update once more information comes to hand.

Please contact you local AAI office for more information on the IMO 2020 Global Sulphur Cap.

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