FIS: Bunker Buyers Focusing Too Much on Low Bunker Prices, And Not Enough on Volatility

by Ship & Bunker News Team
Thursday November 12, 2015

Ship owners and charterers are spending too much time focusing on low bunker prices and are not protecting themselves volatility, John Banaszkiewicz, managing director for Freight Investor Services (FIS), says.

Writing on the FIS website, Banaszkiewicz explains that the volatility of fuel oil is at a five year high compared to crude prices which are at a five year low, and while the shipping industry faces a long road to recovery, "both owners and charterers have a weapon they can use in the short term: fixing their bunker fuel and taking the volatility out of their biggest operating cost."

The FIS director thinks the shipping industry is missing out by not following the airline industry in imposing financial discipline on fuel purchases, and adds that the downward trend of crude oil could end in Q4, "and where crude leads, fuel oil is bound to follow."

"A 180,000dwt Capesize spends an average of 244 days a year at sea and consumes an average of 62 tonnes of fuel per day so this is an issue for charterers as well as owners," says Banaszkiewicz.

"Not managing your bunker exposure has the ability to directly impact the balance sheet."

According to Banaszkiewicz's calculations, the average price differential for Brent crude for 2014 versus 2015 is minus 44 percent, while the spot price for Singapore 380cst bunkers was $226 per tonne on October 6 of this year compared to an average of $557 per tonne in 2014.

in August Ship & Bunker reported that bunkers in some ports had hit a 10 year low.