LNG

The Baltic Exchange in London has opted to keep its benchmark shipping indices unchanged, even as some market players had called for the inclusion of exhaust-cleaning systems that vessels can fit due to the International Maritime Organization ban on ships using fuels with a sulfur content above 0.5 percent from 2020.

In one of the biggest changes in the oil and shipping markets in decades, only ships fitted with exhaust-cleaning systems, known as scrubbers, will be allowed to continue burning high-sulfur fuel.

The Baltic Exchange, whose indexes for global shipping rates are also used in the derivatives market, said that after extensive consultation with members and market participants its indices would show “non-scrubber fitted” vessels in its descriptions.

As preparations for the changes  advance, many operators expect that there will be enough low-sulfur fuel readily available to avoid the need to fit the exhaust-cleaners.

However, some ship owners have been switching to LNG propulsion, though this is a slower process in meeting the IMO curbs and other future anti-pollution measures because new ships have to be built.

The Baltic Exchange was acquired in 2016 by the Singapore Exchange and has been looking for new areas to develop such as introducing LNG charter indices.

In its latest ruling the Baltic Index Council (BIC) announced its decision on the implications of the IMO 2020 sulfur cap for the Baltic Exchange’s time charter indices.

“As formally announced to the Baltic Exchange members, the Baltic will be adding clarificatory wording to its Capesize, Panamax, Supramax and Handysize vessel descriptions to confirm that the index vessels are not scrubber-fitted,” said the Exchange in its short statement.

Explaining the consultative decision-making process, BIC Chairman Stefan Albertijn said it was presented with extensive submissions and views from across the market.

“Our unanimous decision to clarify the vessel descriptions as a response to the IMO 2020 change in sulfur limits, involved careful examination of all the data and feedback received from the consultation process,” he explained.

“We are confident that it is the right decision and one which best meets the needs of the shipping markets we serve,” stated Albertijn.

The Exchange said that the clarified vessel descriptions will be applied from 1 April 2019.

“This was a lengthy and rigorous process that underscored the robustness of the Baltic’s IOSCO-based index administrative practices,” said Baltic Exchange Chief Executive Mark Jackson.

“It was essential for us to take the time to gather the necessary evidence and collective feedback, ensuring that our diverse membership and the wider market was properly consulted and provided with an opportunity to be heard,” added Jackson.