High Bunker Prices "Represent an Opportunity"

NYK line President Yasumi Kudo explained bunker fuel prices are a difficult problem.

Tokyo headquartered shipping line Nippon Yusen Kabushiki Kaisha (NYK) [TYO:9101] said that the cost of bunkers formed the "lion's share" of its operating costs as it reiterated that it "cannot survive based on shipping alone" in its 2012 annual report, but the high bunker prices also represented an opportunity.

"Although high bunker fuel prices are a difficult problem, they also represent an opportunity, because we can differentiate ourselves from competitors through efforts to save fuel," said NYK line President Yasumi Kudo.

The firm said the average price it paid for bunkers in FY2011 rose $182.35 per metric tonne (pmt) year on year to $666.22, with an average price of $642.01 pmt in the first 6 months of the year and $690.43 pmt in the second half of the year resulting in a negative impact on its results estimated at ¥27.4 billion ($350 million).

NYK posted a consolidated net loss of $886 million for fiscal year 2011 which ended on March 31, 2012.

Looking ahead, the firm said it expected the price of bunkers to average $730 pmt for its fiscal year 2012 ending on March 31, 2013, with Kudo saying that every $1 pmt increase translated roughly into a ¥150 million ($1.9 million) decrease in recurring profit.

Slow Steaming

The company said that it had been offsetting high bunker prices through slow-steaming operations "for some time" and would continue to do so, although the effectiveness of such cost cutting measures on its FY2011 bottom line had been counteracted by the increase in bunker prices combined with appreciation of the Yen.

"Generally speaking, reducing the steaming speed of 8,000 twenty-foot equivalent unit (TEU) containerships by 20% more than halves fuel consumption volume. This allows us to cut fuel cost per day by about 50%, from ¥20 million to ¥10 million," said Kudo.

Another way NYK says it will save fuel is through the Innovative Bunker and Idletime Saving (IBIS) Project, which it says is tasked with realising optimised and highly economic vessel operations through the real-time exchange of a vessel's operational data between the ship and shoreside operations.

"We believe putting this type of infrastructure in place ahead of competitors will give us a competitive advantage," the firm said.