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Very low sulphur fuel oil (VLSFO) prices have climbed 35% between the start of November last year and early January which could trigger an increase in bunker adjustment factors, says Sea-Intelligence.

The Denmark-based supply chain research and analysis company, which has a focus on container shipping, highlights a significant upswing in VLSFO prices following the rapid fall seen at the onset of the pandemic. It notes that in December there was a price jump to £407 per tonne and VLSFO is currently around $427 per tonne.

Highlighting that carriers’ different BAF structures mean that they don’t all adjust BAFs at the same time (adjustments can be made monthly or quarterly), Sea-Intelligence notes that: ‘For carriers that make monthly adjustments, this means that low-sulphur fuel prices can trigger BAF increases, especially from March onwards.

‘For carriers that make quarterly adjustments, Q2 BAF (applicable in April-June) would be based on the average fuel price in December-February, and while the beginning of 2021 remains stable by virtue of stability seen [in] most of 2nd half of 2020, the calculational basis for BAF stands to increase significantly for 2021-Q2.’

The company also points to an increase in the VLSFO premium from around $50 per tonne for most of 2020 to $86 from mid-November onwards. This, it says, means carriers will see an improvement in the relative value of scrubber installations (so they can use high sulphur fuel oil), and it may also mean a renewed focus on the discussion as to whether BAF formulas should take scrubber-equipped vessels into account, particularly on Asia-Europe trades where a significant amount of scrubber-equipped tonnage is deployed.

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