Bunker procurement strategies in liner shipping companies : practical guide to bunker procurement and risk mitigation tools against fluctuating bunker prices

Abstract

Bunker fuel is one of the most important cost drivers for the whole of the shipping industry and incidentally it is also one of the most volatile markets in the world now given its close relationship with the equally volatile crude oil market. As in recent years, especially in the period from 2004 to 2008, crude oil prices were breaking new record levels at a regular interval until the global economic crisis in the 2009 halted the bull run of oil prices. And this rise in oil prices affected many industries, for example the airline industry had to charge higher fuel surcharges to their customers and many motorists were badly affected by the surging pump prices. This phenomenon did not spare the shipping industry and we see many ship-owning companies formulating numerous risk management programmes to control or transfer rising bunker cost away from their businesses. Bunker cost thus in recent years, has become one of the most critical cost component that they want to manipulate in order to improve on the profitability and reduce the risk exposure of the company so that all shareholders of the company can be appeased.