Intertanko, Worldscale Address Bunker Price
Thursday, December 30, 1999
Intertanko's Worldscale Committee met with Worldscale Association Ltd.'s Management Committee on Nov. 10.
The large discrepancy between the current actual bunker prices and the bunker price assumption upon which the Worldscale Schedule's 2000 edition will be based was the major issue at the meeting.
The bunker price to be used in the 2000 edition has been assessed at USD 86.50 per ton, that being the average price during the period of Oct. 1, 1998 through Sept. 30, 1999. Bunker prices have fluctuated widely during the 12-month period under review. For a long while they were in the $50-$60 region, whereas current bunker prices are closer to $150. When the (New) Worldscale was introduced in 1989, one of the new features was that it was based on a worldwide average of bunker prices for the month of September of the previous year. Following various complaints, the Worldscale Associations gave notice in 1996 that from the 1998 Edition, the bunker price assumption to be used would be the worldwide average for the 12 months ending on 30 September of the year prior to the applicable Edition.
A scale that is not amended daily (or even hourly) cannot properly reflect the changes in the bunker prices. Some assumptions have to be made, and the Worldscale Associations have given considerable thought to making these as reflective of current conditions as possible. At the meeting, the Intertanko team suggested other methods that could reduce the anomalies caused by the current system. These suggestions included:
o reintroduction of a scale valid for six months, rather than the current 12 months;
o applying the bunker prices found in the futures market;
o using a formula to be printed in the Worldscale schedule with a bunker price to be posted on the Internet;
o introduction of a matrix to be printed in the Worldscale Schedule for use in conjunction with the actual bunker price (to be published by the Worldscale Associations) which could then be applied at the time of entering the contract or at the time of commencement of loading; and
o an electronic form of the Worldscale Schedule which could be subject to more frequent revisions.
The Worldscale Association pointed out that the Worldscale system needs to be based on stability and predictability in order to retain the universal use that it has achieved with shipowners, charterers, traders, brokers and other related parties. If the system or the flat rates change too frequently, Worldscale may no longer enjoy the support it has today, and the market may turn to other methods. (Source: Intertanko)