Low Bunker Prices Cut Into Eco-Ship Advantages

The ongoing drop in bunker prices may mean that eco-ship owners will have to cut charter rates in the coming year.

Plummeting bunker prices may be cutting into the advantages of investing in eco-ships, though some remain optimistic, Tradewinds reports. 

Data from Ship & Bunker shows that over the past two months the price of key grade IFO380 at major bunkering ports has fallen as much as 25 percent, so with the cost advantage of reduced bunker consumption also diminished, older ships have been closing the gap on newer, fuel-efficient vessels in the charter markets. 

"The operating-cost differential between ultra-modern, consumption-friendly vessels and converted older tonnage is a much closer calculation than what it has been," said Clarkson in a report, adding that the current differential is not yet reflected in the market. 

However, lower bunker prices may be here to stay with ACM Shipbroking container market analyst Jonathan Roach saying that "indications are that $80 per barrel [oil] is going to last until at least 2015 or at relatively low levels in the short term."

If this is the case, eco-ship owners would have to cut their charter rates in the coming year.

Roach also speculated on new opportunities that may spring up from a potentially unfavourable market, such as the cheaper cost of launching new programs, or lower fuel costs for liner operators when falling freight rates have also done much to eat into profits. 

"The drop in bunker prices is really a gift that they can use to bolster their bottom line in a time of relative volatility in revenue/ freight rates," he said.

A report released last month also drew concerns to the effect of low oil prices on eco-ship investment, which has put discounted Chinese ships that have a higher fuel consumption at an advantage.