Similar to last year and for every year since the current Worldscale system was established some 50 years ago, the bunker prices are the biggest factor influencing the changes in flat rates from 2018 to 2019, Poten & Partners said in an industry note.
Based on the increase in average fuel prices, Poten said that it expected flat rates to increase by 15-20%, a similar rate to last year.
The 2018/2019 changeover maybe the last time that Worldscale uses the average price of 3.5% sulfur HFO bunkers in flat rates calculation.
For 2020, Worldscale might want to base its freight calculations on the fuel that the vast majority of tankers will be using that year, ie low sulfur IMO 2020 compliant fuel, Poten said.
However, if it decides to go down that route, Worldscale will face a problem – the fuel (and the associated pricing data) will probably not be widely available until the second half of next year. How will the Worldscale Association deal with this uncertainty?
Volatility is mainly caused by changes in bunker prices. Worldscale uses the average bunker costs from the beginning of October of the previous year to end September of the current year to establish the bunker cost assumptions for its calculations.
Bunker prices for the period 1st October, 2017 – 30th September 2018 averaged $418 per tonne for 3.5% sulfur HFO, some $103 higher than bunker prices for the same period a year earlier. Based on this, flat rates will increase about 19% on average, similar to the increase seen last year.
What could be the impact, if we assume that Worldscale will switch to low sulfur bunker fuel in its calculation? Poten asked.
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