World News
Report: Shipping Companies Must Reduce Bunker Costs
In the current challenging markets, shipping companies must focus on reducing their bunker costs, the Boston Consulting Group (BCG) has said.
The firm notes that freight prices have fallen while bunker costs have risen, at times exceeding 50 percent of total operational costs, and bunker prices have become "extremely volatile" as crude prices fluctuate.
"The market is not likely to recover soon," BCG said.
"To build a competitive advantage, as well as to relieve pressure on margins, shipping companies must focus on reining in their costs.
"And they should start by reducing their biggest one: bunker."
BCG said bunker prices have risen more than crude oil prices because the chemical industry has moved refinery capacity away form bunker production to fill demand for high-distillate products.
Environmental regulations, including a growing number of Emissions Control Areas (ECAs) created by the International Maritime Organisation (IMO), have forced companies to switch to the use of more expensive low-sulfur fuel, and the IMO requirement that all vessels have a Ship Energy Efficiency Management Plan by January 1, 2013 has also demanded a focus on fuel management.
Another factor in the cost of fuel oil is companies' management of procurement, consumption, and efficiency measures.
"Performance varies widely," the firm said.
"For example, BCG's Container Benchmarking Initiative (CBI) found that bunker consumption among participants fluctuated by as much as 30 percent within any given vessel class."
To improve fuel efficiency, the firm said, companies must move beyond slow steaming and improved bunker procurement methods and develop teams and disciplined methods to address the issue.
Some first steps for "quick wins" are improving hull cleaning for better hydrodynamics and improving ship-to-shore communication to allow extra sailing time, allowing for slow steaming.
A recent Bloomberg analysis predicted that fuel oil demand will hit its highest point ever in 2013, putting more pressure on shipping companies.
Key Bunker Prices More
| VLSFO | MGO | |||
|---|---|---|---|---|
| $/mt | +/- | $/mt | +/- | |
| Singapore | 502.00 | 7.00 | 617.00 | 6.00 |
| Rotterdam | 455.00 | 8.00 | 619.50 | 4.00 |
| Houston | 467.00 | 4.50 | 625.00 | 2.50 |
| Fujairah | 495.00 | 6.00 | 712.50 | 1.50 |
| Global 20 Ports Average | 524.50 | 4.50 | 710.50 | 4.00 |
| Global 4 Ports Average | 479.50 | 6.50 | 643.50 | 3.50 |
| Global Average Bunker Price | 570.50 | 2.00 | 747.50 | 5.50 |
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