The first such contract was brokered by Freight Investor Services (FIS) at the start of February on the basis of a $200 per tonne spread between 0.5% fuel oil and Singapore 380 HFO for December just before the 0.5% sulphur cap comes into force on 1 January 2020. The contract is designed to provide a degree certainty over fuel price once full demand for 0.5% low sulphur ramps up.
Based on limited trading the Platts index reported a $30 per tonne spread in Singapore in January, $40 per tonne in Rotterdam.
Owners fitting scrubbers to continue using HFO are banking on spread being relatively high to ensure a quick pay back on the cost of the exhaust gas cleaning units.
“With the uncertainty surrounding the cost of the switch to 0.5% sulphur fuel from January 1, 2020, as well as the need for owners with scrubbers fitted vessels to benefit from a wide hi/lo price differential, we are glad to give more clarity to the markets. Since this trade was concluded, we have seen more liquidity enter the market and the price spreads are expected to be volatile for some time yet,” said Chris Hudson of the FIS bunker desk.
No forward curve 0.5% low sulphur fuel oil futures contracts is currently being published and FIS said Platts would provide settlement and margin data on the contract from February 2019 and as liquidity builds, FIS would provide a regular forward curve.