Capesize

17950

Sep-17
0.00 0.00%

Panamax

11175

Sep-17
225.00 2.05%

Iron Ore

76.5

Sep-17
0.85 1.12%

Sing 380

278.25

Oct-17

Coking Coal

208

Sep-17
0.00 0.00%

Nola Urea

212.5

Sep-17
0.00 0.00%

Baltic Briefing Seminar: 2020 Sulphur Cap; implementation, impact & price risk management


Baltic Briefing Seminar: 2020 Sulphur Cap; implementation, impact & price risk management

FIS took part in the recent seminar at the Baltic Exchange on the 2020 sulphur cap, with head of the bunker desk Luke Longhurst speaking on the changes ahead for the shipping industry in hedging via the cleared market.

The view of the panel of experts – which also included the IMO, refiners, physical suppliers and owners – was that the new grade of low sulphur fuel the shipping market will require for compliance with the 2020 cap could cost as much as 40-50% more than current HSFO levels.

This means that anyone who is currently trading bilaterally may need to extend their lines of credit from 2020 onwards by 40-50%.

Whether credit providers will be prepared to extend levels by this amount when there has been no strengthening of their clients’ balance sheets and simply an increase in operating costs is questionable.

This is going to be a real issue and one that needs to be carefully addressed now so as not to disrupt daily operations come January 2020.

There are two solutions available:

  1. Hedge less bunker exposure – and therefore increase risk levels
  2. Move into the cleared markets to hedge and avoid the lengthy credit negotiations.

 

For more information on the 2020 sulphur cap, or to explore hedging solutions in the cleared market please contact the FIS bunker team – bunkers@freightinvestor.com.