Critical analysis of the Shipping Fuel (bunkers) market over the past two years.

Bunker fuel is the fuel that shipping companies use to fuel their marine fleet. Currently, the most widely used bunker fuel is fuel oil. However, apart from fuel oil, other middle distillate fuels are also utilized as bunker fuels. Approximately 70% of the total voyage expenditure for a vessel is bunker fuel costs and ship operators prefer purchasing bunker fuel from ports with the lowest cost. Therefore, some operators prefer to purchase a large portion of the total fuel requirement for the voyage from a single port in which the prices for bunker fuel are more economical.

However, this is not a strategy followed by many operators since many others may spread the total fuel purchase over numerous ports. The stringent sulfur emission standards, especially in Emission Control Areas (ECA), have gradually led shipping companies to adopt clean fuel grades.

All major ports of the world are now trading middle distillate and low sulfur fuels. Though marine fuel is traded at almost all ports around the world, a major volume of the overall trading activities are concentrated among a select number of ports. These include ports that are strategically located along major transit routes and so they have been the prime bunkering destinations(Stopdord, 2009). For example, the Port of Singapore and Fujairah are large bunkering ports, which account for a significant share of the overall bunker fuel traded in the global market.

An increase in fuel prices can bring many changes. Βunker prices account for 70% of the cost of operating a dry bulk vessel and any significant changes in fuel prices will have a knock-on effect on freight rates. If ships managers want to remain competitive, they will have to reduce their profits to absorb a large percentage of the extra costs. However, reductions will not only appear in the profits, but cuts will be made on expenses too. The cuts will undermine the development of shipping since there will be no investment interest. As a result of such a strategy only older vessels to remain active that have a low level of maintenance. These data will cause aversion to charterers mainly those of short trips that can be served by other means. On the other hand, the additional fuel costs can be added to freight rates. In such case, the alternative land resources will be even more appealing to shippers.

In any case, voyage and time-charter rates will be affected differently. When a vessel is fixed on a $/mt or voyage basis, the costs of fuel are transferred to the owner. Because of that some owners may agree to discount their offers when bunker fuel prices fall. In time-charter deals, the charterer pays for fuel and savings on bunkers could potentially translate into higher $/day hire rates for owners.

For example, the freight rates for a Panamax coal route from Ventspils, Latvia, to Rotterdam, showed a 25 cent drop in October 2014. The drop came despite tighter tonnage list in the UK Continent and a generally positive sentiment in the Atlantic Panamax market. According to analysts, the lower rates were not the result of supply and demand fundamentals, but the result of falling bunker prices in the Northwest Europe (Platts, 2014).

At that time, bunker prices out of Rotterdam fell to their lowest level since September 2010. This drove down costs for vessels which sail this route, as they typically will ballast to the Baltic from UK, loading bunker fuel from Rotterdam, the regional bunkering hub (Platts, 2014).

Βunker prices have significantly decreased in 2015 in all major ports. We can actually say that the prices were cut in half (for example, the average bunker price in Rotterdam in 2015 was 270,3 whereas only a year ago it was as much as 532,1, expressed in average 380 cst price, $/tonne). On the other hand, the freight rates have also been cut down. Therefore, we assume that the fall in bunker prices has lead to a reduction in freight rates, probably because of discounts offered by the owners, as we have discussed previously. However, this loss in earnings is balanced by the reduction in costs due to lower fuel prices. Therefore, we can conclude that in long-term, the total gains for the shipowners (earnings – losses) can be considered as stable. However, in order to decide whether the shipping industry has gained, lost or remained indifferent to the fluctuations of fuel prices we need to conduct more detailed calculations.

This entry was posted in Ναυτιλία and tagged , , , , , , , , , , . Bookmark the permalink.

Αφήστε μια απάντηση

Η ηλ. διεύθυνση σας δεν δημοσιεύεται. Τα υποχρεωτικά πεδία σημειώνονται με *