Not Logged In, Login,

Saturday, October 20, 2018


As reported in the Weekly NEWS No. 04 and February General Circular, the Worldscale Associations advised that they would provide INTERTANKO with a paper outlining their position and actions regarding their stance on bunker prices to indicate the Associations’ continued active review of these matters.

We have subsequently received the following text from them:

“Following one of the regular meetings held recently with the INTERTANKO Worldscale Committee certain representations were listened to with interest by the London Worldscale Committee. Further to that and being aware that there are many new tanker owning companies, charterers, traders, individuals etc. operating today we as WORLDSCALE feel that it would be an ideal opportunity to set out an historical background as to what has occurred over the last 30  years or so, since the introduction of WORLDSCALE, and how the Associations have reached today's methodology for the inclusion of bunker costs.

In 1969 the bunker prices used were assessed as at 1st January 1969 but for subsequent editions weighted average bunker prices over a stated period were used. In 1973 for the 1974 edition a system of bunker price adjustment factors was produced for use by prior agreement by WORLDSCALE users who had to register with the Associations to obtain these monthly figures but by August 1974 the London Association's minutes record that there had been minimal take-up of the figures and few if any recorded instances of their use and concluded that the figures would not be offered in 1975. In 1976 twice yearly editions were introduced and in 1979 the July edition was the first to also incorporate bunker price changes. The January 1980 edition was the last to reflect weighted average contract prices over 12 months and until the July 1983 edition weighted average contract prices over a six month period were used. From the January 1984 edition the basis was altered to be the average market prices applicable over a six month period with the January edition using prices over the preceding April to September period and the July edition usingprices over the preceding October to March period. Thus it can be seen that many of the changes made were attempting to address the bunker price issue.

In 1989 "NEW WORLDSCALE" was introduced after much internal research and industry consultation. The Associations completely reviewed all aspects of the WORLDSCALE system for "NEW WORLDSCALE" and not least the bunker price assumptions and applications. Experience of the old methods which had seen the use of six monthly editions actually exacerbate the problems of using historicdata for bunker price determination and the use of a bunker figure in the calculations derived as 50% of the price at the first load port and 50% of the price at the first discharge port making it extremely difficult to structure an appropriate bunker price adjustment clause a number of changes were made to the way bunker prices were calculated and used.

In "NEW WORLDSCALE" a single weighted average bunker price was calculated by an independent bunker broking source and published in the Preamble to the Schedule. This was initially for the month of September prior to publication as the latest data that could be incorporated in the physical printing schedule. This was subsequently altered for the 1998 edition, after outside representations were made that using only one month could be subject to external manipulation or recurrent seasonal factors, with an annual average up to the end of the September prior to publication. In addition the round voyage mileage was published alongside each rate in the Schedule to enable easy use of a bunker adjustment clause by agreement between the parties as it is easily seen that the largest influence on bunker price in the rates is the voyage length and the actual algorithm has recently been published by INTERTANKO as part of their suggestion for a bunker adjustment clause. The publication frequency has been reduced to an annual schedule following representations from a wide range of users for more temporal stability in the underlying rates structure.

Using these methods the Associations' research has shown that the bunker price used for WORLDSCALE since 1989 has overpredicted the actual annual average on as many occassions as it has underpredicted it and the averaged variations from the actual over an eleven year period has been less than USD1 per tonne. Nevertheless the Associations actively view recent contributions from INTERTANKO as constructive ideas and has, and is, continuing to look at these and other suggestions to see if there is a feasible way of improving the method of dealing with bunker prices.

At this time it is worth stating that WORLDSCALE is an industry tool, being clearly headlined as a nominal freight scale, representing an overall trading device for owners, charterers, traders, brokers etc.. It is not designed to represent or misrepresent one section of the tanker business more fairly or unfairly than another.”

INTERTANKO’s Worldscale Committee plans to meet in London on 13 March 2000. For further information