Friday, December 19, 2014

ECA bunker surcharge clause introduced

WP Group Fuelling Huelin Dispatch

To minimise the risk of bunker volatility for its members, due to the forthcoming ECA sulphur cap and to take account of increasingly onerous regulations on emissions, INTERTANKO has produced a bunker surcharge clause. 
This clause – ‘INTERTANKO MARPOL Annex VI Clause for Voyage Chartering in Emission Control Areas’ - addresses any additional bunker costs when trading in an ECA.

The wording has also been adapted for use in the parcel trades – ‘INTERTANKO MARPOL Annex VI Clause for Voyage Chartering in Emission Control Areas (Parcel trades)’.

It has been put together to assist in recouping actual amounts paid for bunkers, thereby avoiding disputes with charterers over bunker prices and minimising risk associated with price volatility.

Where an owner fixes using Worldscale, there is no need for a bunker adjustment clause to cover the additional costs of low sulphur fuel used in an ECA. These extra bunker costs are not yet included in the flat rate but are today compensated by fixed differentials set out in the Worldscale book (using 2014 rates).

However, the Worldscale Association recently announced its fixed rate differentials for 2015. The figure set for bunkers with maximum 0.1% sulphur content – Baltic and North Sea ECA and European in-port bunker allowances will be $920.75 per tonne low sulphur fuels for the North American ECA & Caribbean ECA and in-port bunker allowances will be $1,028.02.

Baltic and North Sea ECA miles will attract a fixed differential of $48.35, while North American ECA miles will be compensated by a fixed differential of $65.31.

The bunker prices Worldscale will use for calculating other 2015 Worldscale flat rates will be $614.81 per tonne.

Not all members fix using Worldscale. Given the tighter ECA requirements from 2015, INTERTANKO has developed two clauses to accommodate the ECA differentials when fixing outside of Worldscale, on lumpsum, or USD per tonne basis.

To achieve maximum certainty at fixing and reimbursement of additional ECA costs, the mechanism of the CPP/dirty trades clause is based on actual consumption. Time within the ECA can be taken from the Master’s statements (as it would be with a deviation or call at an interim port) and the additional bunker costs can then be invoiced and paid without deduction.

Charterers should be in a position to make this calculation and pay the bunker surcharge together with freight. Timings within the ECA will be clear from the Master’s statements as they will coincide with a fuel switch when entering the ECA and will end in the ECA port at ‘hoses off’.

The reference prices for fuel used in the first clause are those available prior to loading on ‘first in first out’ basis, again a formula that is familiar when calculating bunkers consumed for deviation, or interim port calls. This can easily be adapted if members are more used to using ‘bunkers last stemmed’, or if a reference point from Platts is preferable.

The parcel trade version shows how a reference to Platts might work. Either way, the fuel oil reference prices used can be tracked in supporting invoices so that any additional charge can be verified by charterers.

Owners and charterers must therefore agree the following values prior to fixing, INTERTANKO said:

Cs = Daily consumption at Sea
Cp = Daily consumption at Port

This is unavoidable given the major bunker cost differential in trading in an ECA area, the organisation stressed. These figures may vary owner to owner but figures for the same ship type should be comparable and therefore capable of agreement.

There would be no additional compensation for owners who have opted to use scrubbers, or other alternatives to low sulphur fuel to satisfy the ECA requirements.

By using the Worldscale formula, or the INTERTANKO MARPOL Annex VI clauses for Voyage Chartering in Emission Control Areas, an owner who trades in and out of an ECA area can be properly compensated for the additional costs of using low sulphur fuels.

This is imperative now as for example, a vessel berthed in an EU port for over two hours is already required by the EU Sulphur Directive to use 0.1% sulphur content fuel. It will become more important in January 2015 and beyond as sulphur emission regulations continue to tighten. 

Owners are therefore encouraged to begin negotiations with charterers to ensure a proper distribution of risk and cost that the new requirements will bring, INTERTANKO warned. 

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