Marine fuels: VLSFO, HSFO, MGO and the IMO 2020 sulphur cap
Under MARPOL Annex VI the sulphur cap for ship fuel fell from 3.5 % to 0.5 % on 1 January 2020 (IMO 2020); in Emission Control Areas – northern Europe, North America and, from 2025, the Mediterranean – the limit is 0.1 %. VLSFO (0.5 % S) is now the main fuel; HSFO (380 cSt, 3.5 % S) may only be burned by ships fitted with scrubbers; MGO/MDO (0.1 % S) is used in ECAs and auxiliary engines. Fuel quality is specified under ISO 8217, and every delivery requires a bunker delivery note (BDN) and a MARPOL sample.
Related terms
Bunker adjustment factor (BAF)
A variable surcharge that carriers add to the base freight to pass on fluctuations in ship-fuel (bunker) prices. It is usually revised quarterly or monthly in line with VLSFO prices in Singapore and Rotterdam. BAFs rose markedly after the IMO 0.5 % sulphur cap took effect in 2020; always ask whether a freight quote includes BAF.
Freight (freight rate)
The price paid to the carrier for moving goods. Container freight is priced per box (e.g. USD per 40’HC), bulk freight per tonne (USD/mt), and chartered ships by daily hire (USD/day). Surcharges can be added to the base rate: bunker (BAF), currency (CAF), terminal handling (THC), congestion and war-risk surcharges. Freight markets are volatile and are tracked through indices such as Drewry, Freightos (FBX) and the Baltic Dry Index (BDI).