How Much Has IMO2020 Raised Bunker Prices?

Ship anchored in Vancouver. Image Credit: Ship & Bunker

As predicted, bunker buyers started to lift IMO2020 compliant VLSFO starting from Q4 2019. But as evidenced by the fact HSFO in November was still the most popular grade of fuel in Singapore, it seem it was not until last month when vessels were compelled to lift the 0.50% sulfur products that it became the fuel of choice for buyers.

The rise in demand ahead of the new rules coming into force on January 1 has caused VLSFO prices to rise sharply.

Ship & Bunker data indicates the average VLSFO price in October across the "G4" global four major bunkering ports of Singapore, Rotterdam, Fujairah and Houston was $542/mt. This had risen to an average of $608.50/mt for December.

At the same time, the cost of HSFO has fallen as demand for the fuel ebbed away, but the price movement has been much less pronounced than the shift in sales volume. The monthly average G4 IFO380 price for October was $337/mt, and $312.50/mt in December.

So how much more has the new IMO2020 rule cost bunker buyers?

The above numbers indicate the premium for VLSFO vs IFO380 last month averaged $296/mt in the G4 major bunkering ports. That average premium for January so far (January 1-13) has risen to $339.5/mt. Good news for owners of scrubber equipped tonnage at least.

But as previously discussed, to understand what the new rules are costing the industry in practical terms we need to look at the cost of what the average buyer is lifting today (VLSFO) compared to what they were lifting last year (IFO380).

To that end, the G4 IFO380 price in December 2018 was $368/mt. 

With the average VLSFO price at $608.50/mt for December 2019, it suggests buyers in major ports last month were paying $240.50/mt more for fuel year-over-year.