![]() ![]() ![]() ![]() ![]() It is for this reason that shipping companies are extremely particular about their bunker consumption and spending, expending considerable efforts to ensure optimisation of the bunker procurement process, as well as having in place a robust mechanism for monitoring and reducing consumption thereof. Over the past couple of decades, bunker prices have typically been on an upward trend, save a few years of global downturns and recessions, which meant that shipping companies were left staring at ever-increasing bunker spending, year after year.Īs a consequence of the wafer-thin margins that the container shipping industry has historically experienced (prior to the super profits in 20 that can primarily be attributed to global supply chain disruptions, widespread port and quayside congestion, and Covid-induced lockdowns), as well as the cyclical nature of the industry, Carrier’s have focussed rigorously on reducing their cost base, with Bunker obviously being the prime area of attention, by virtue of it comprising over half of overall operating expenses. These fluctuations in price make it difficult to estimate expenses and budget for forthcoming periods or set freight rates to reflect costs to a reasonable degree.Īpart from this, bunker, though proportionately tied to business volumes/ containers transported, is not a completely direct function thereof (as would be the case with Terminal Handling Charges, which are, in essence, the straightforward product of the THC quantum charged by the port/ terminal/ stevedore and the number of containers/ quantity of cargo handled), and is, therefore, an area where companies need to adopt a multi-pronged approach and resort to innovative strategies to reduce bunker consumption and overall bunker spend. Matters are aggravated by the inherent volatility in bunker prices, which show violent fluctuations consequent to global geo-political tensions and are dependent on the actions of a cartel of oil-producing nations. As anyone working in the shipping industry will attest to, bunker (or fuel) is one of the biggest expense items for any container shipping company.Īccording to most estimates, bunker costs comprise circa 50% to 60% of a carrier’s total operating expense, thus making it by far the largest component of the carrier’s variable cost base.īunker prices consequently exert an inordinately higher influence on any shipping company’s cash flows and have the potential to make or mar its fortunes. ![]()
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