Cruise Line Royal Caribbean Cuts HSFO Hedging For Scrubber-Equipped Fleet

Royal Caribbean appears to have reduced its hedging from 2021 onwards. Image Credit: File Image / Pixabay

Cruise line Royal Caribbean has sharply cut its fuel hedging programme at the start of IMO 2020 as the company faces one of the most volatile high sulfur fuel oil (HSFO) markets in recent memory for its scrubber-equipped fleet.

At the start of February as the company reports full-year results it publishes fuel hedging figures for the remainder of the current year and the three years beyond that.

In results published this week Royal Caribbean said it has hedged 54% of its forecasted consumption for the remainder of 2020, roughly in line with previous years.

But for 2021 the company has hedged just 30% of its requirements, the least for the year-ahead figure in at least the past decade.

By this time last year Royal Caribbean had hedged 54% of its 2020 requirements, and over the past decade the year-ahead hedging figure has ranged between 44% and 59%.

For 2022 and 2023 the company has hedged just 19% and 5% of its requirements, respectively, the company said this week -- both also abnormally low levels compared with the past decade.

The majority of the company's fleet is equipped with scrubbers, meaning its bunker buyers are still mostly buying HSFO while others have moved on to new very low sulfur fuel oil (VLSFO) blends.

The decision to cut hedging for 2021 and beyond may reflect a plan to get as much mileage as possible out of a weak HSFO spot market next year -- although if that were the case, the company might also have been expected to keep hedging to a minimum for 2020.

Alternatively, it may reflect an increased difficulty in hedging its requirements now HSFO is no longer the dominant bunker fuel and may not always be available in every port.

The company expects to consume 375,200 mt of bunker fuel in the first quarter and 1.534 milllion mt in total this year, up from 2019 forecasts of 364,200 mt and 1.486 million mt, respectively, published this time last year.