Are You REALLY Ready for IMO2020? These Are the Questions to Ask Yourself

by Paul Hardy, NSI
Wednesday October 16, 2019

With 77 days until the IMO 2020 rule comes into force, the market's transition to 0.50% sulfur fuels is finally underway.

Whether you're a bunker buyer, physical supplier, or you add your value elsewhere in the transaction chain, many of us have spent a lot of time preparing for what is the most significant event our industry has seen.

But are you REALLY ready? Here is a checklist of 30 things to ask yourself to find out.

  1. Credit - Do you have adequate credit in place to take into account changes in product types and potential spikes in crude?
  2. In all of your major ports- do you have access to avails info as well as COQ's from key suppliers?
  3. In minor ports- Can you quickly assess what is available?
  4. Pricing- have you decided on spot or contract?
  5. Have you studied the relevant indexes to price product off of?  Is there sufficient liquidity in those indexes? Are you comparing like with like?
  6. Hedging- have you put a hedging programme in place?
  7. Forward market- Do you have expert knowledge of how to take advantage of rapidly changing market dynamics? If not can you outsource it?
  8. Have management set a target for bunker costs for 2020. If so, what is your plan to achieve it? Will management accept a 'paper loss' to achieve a bunker price under budget?
  9. Do you have coverage on the hedging side with market makers or traders?
  10. In a multi-fuel landscape- do your operators have a clear plan as to how to order and split the different products?
  11. If you are left with HSFO on board- what are the optimum de-bunkering locations?
  12. How does the forward curve effect the value of potential de-bunkered product?
  13. What type of 0.50% product will you lift?
  14. Where are the emerging areas with cheaper 0.50% product?
  15. What is the optimum Sulphur content of your 0.50% product based upon your risk/operational profile?
  16. What are the steps you will take in case of Sulphur testing off-spec?
  17. Do you have an audit trail and plan regarding FONAR's?
  18. How will you benchmark performance? Which indexes? Time frames?
  19. When will you do the switch to LSFO? What is the reasoning behind the timing? What are the risks and rewards?
  20. You have a number of scrubbers fitted- have you checked the availability of HSFO in all of your potential ports?
  21. Scrubbers- have you calculated correctly the spread between HSFO and 0.50% product?
  22. Have you done anything to lock the spread?
  23. Your Chartering departments are asking more and more about bunker prices- Have you got the necessary tools to forecast/manage the risk to enable accurate flow of info?
  24. When is the optimum time to float enquiries in the 'new market'?
  25. Have you checked  your credit report? Does it represent an accurate reflection of your business? What can you do to improve the rating?
  26. Reporting- what are the additional reporting requirements for management? Can you provide these easily?
  27. Is your  internal platform up to the task in the new market conditions?
  28. How easily can you  change strategy?
  29. Do you need additional resource? Do you hire internally or outsource? What are the benefits of each?
  30. Do you have a ship by ship plan and has this plan been communicated to the crew effectively?

Finally, what represents success for your company? If the question is not asked in advance it is difficult to judge whether you have done a good job.