Archives for posts with tag: bunkers

Not for the first time in shipping’s history, the industry’s choice of fuel is sharply in focus. This week we review not just the imminent low sulphur fuel switch, but also the role of alternative fuels in reducing the ~820mt carbon (~2.3% world output) that the shipping fleet produces per year. But for an industry that took over 50 years to switch from wind to steam, the impact may be no less radical and quicker besides!

For the full version of this article, please go to Shipping Intelligence Network.

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This week’s Analysis outlines recent trends in the shipping markets, in a summary taken from our upcoming Shipping Review & Outlook. From the varying market cycle positions, to economic headwinds, “manageable” supply growth, changing financial landscape, growing focus on environmental regulation and ‘green’ technology, and impacts of IMO 2020, there is plenty to review!

For the full version of this article, please go to Shipping Intelligence Network.

 

This week we review scrubber retrofits, tracking the vessels, yards and volume of tonnage involved. As activity ramps up, and with >1% of the fleet on an annualised basis projected to be off hire, shipping market fundamentals may get a helpful boost. But despite this ramp-up, looking ahead will it be long before our LNG fuel capable vessel count (~800 today) matches our scrubber vessel count (~4,000)?

For the full version of this article, please go to Shipping Intelligence Network.

In this week’s analysis, we again update shipping’s mid-year report, reviewing progress across a range of shipping sector “subjects”. Our overall ClarkSea Index increased 8% y-o-y in the first half, to move marginally above the trend since the financial crisis. However while some “subjects” still achieve an “A” for effort, others might have to “repeat a year” unless they sit additional classes over the summer!

For the full version of this article, please go to Shipping Intelligence Network.

 

On 15th September 2008, the collapse of Lehman Brothers crystallised the financial crisis and the onset of the worst economic downturn for a century. To a shipping industry used to extreme cycles but transitioning to recession with rapid trade collapse and a huge newbuilding orderbook the initial shock was severe and the “hangover” prolonged. This week’s Analysis compares the situation almost ten years to the day.

For the full version of this article, please go to Shipping Intelligence Network.

 

Historically, the fuel of choice for the vast majority of large cargo ships has been heavy fuel oil. But in 2020, sulphur oxide emissions will be capped to 0.5% by IMO convention, ruling out current standard grades of HFO. Both fuel consumers in the shipping industry and producers in the refining industry have now had a little time to consider the potential options to deal with the imminent regulatory change…

For the full version of this article, please go to Shipping Intelligence Network.

For the golfers contesting this week’s Ryder Cup, the impact of bunkers can be minimised through skill, practice and a little luck. For shipowners, bunkers are unavoidable, and over the past few years high oil prices have ensured that they have been a major handicap. Shipowners are getting plenty of practice at dealing with high oil and bunker prices, maybe they are due a change in their “luck”?

When an onlooker suggested he may have been lucky holing three bunker shots in a row, golf legend Gary Player famously replied “the more I practice, the luckier I get”. Well, over the past few years a combination of low rates and high fuel costs have given shipowners plenty of “bunker practice”.

Par For The Course

The Graph of the Week tracks the share of freight revenue accounted for by bunker costs. In the early part of the period shown, the low and relatively stable oil price ensured that bunkers did not become too much of a burden, with peaks and troughs corresponding to the strength of the freight markets. Then in 2007-08 oil prices started to rise steeply, but the strength of the freight market helped to cover the impact of rising bunker costs and ensure that the share of bunker costs remained below 50%.

In The Rough

However, in the wake of the global financial crisis, a combination of high oil prices and weaker markets caused the share of freight revenues accounted for by bunker costs to climb to much higher levels. This peaked in late 2012 and early 2013, when bunker costs exceeded 80% of freight revenue on the example tanker voyage, with the extra costs of low sulphur fuels generating even higher shares on some routes.

Driving Down Costs

Well-practiced shipowners responded by finding ways to reduce fuel consumption: slow-steaming, retro-fitting fuel-saving equipment and ordering “eco-designs”. They have found environmental regulations pulling in the same direction, and in a way helping. After all, the risk of ordering a slower but more efficient ship is greatly reduced if everyone has to do so to meet regulatory targets.

Out Of The Woods?

Further help has come from the 15% fall in oil prices since June resulting in a reduction in bunker costs (Rotterdam 380cst currently stands at $540/t, down from $601/t in June). Oil prices are on track for their third straight monthly fall, with a combination of sluggish demand and ample supplies seeing the benchmark Brent crude spot price drop below $96/bbl this week, the lowest level for two years.

Bunkers’ share of freight remains volatile and dependent on market fluctuations. Recently the percentage has started to fluctuate in a slightly lower range than previously as lower bunker prices have helped to reduce the fuel cost burden. However, bunkers’ share of revenue is still uncomfortably high for many, and shipowners have had to learn to deal with high bunker costs. For those currently in a position to benefit from lower prices today, is it luck, or is it practice?

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