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News / Price war a Christmas bonus for carriers as bunkering costs continue to decline

first_img Bunker prices continued to plunge today and are predicted to dip below $350 per tonne early next week as oil traders engage in a supermarket-style price war.A 40% reduction in the cost of heavy fuel oil (HFO) since the summer will save the shipping industry billions of dollars and be welcomed as an unexpected bonus for ocean carriers facing continued freight rate pressures.But it would be a brave chief financial officer that signed off a container line’s revised 2015 budget based on bunkers’ current prices – the price of oil can go up as well as done.Indeed, potentially stronger global demand – ironically due to lower oil prices – and any one of a series of geopolitical upsets could spike oil prices again in 2015.Meanwhile, upcoming ship emission regulations requiring the switching to tanks of more expensive low-sulphur fuel when entering the ECAs [emission control area] of major tradelanes will negate some of this price reduction.In theory, carriers will attempt to impose low-sulphur surcharges on shippers to recover the difference, but in practice they could be difficult to implement, given that marine gas oil has fallen to around the same level of the price of HFO when some of the surcharges were originally announced.Tumbling oil prices have distracted from the search for alternative fuels – although the new ECA regulations coming into force in North Europe, the US and Canada from 1 January have ensured that the matter stays high on the agenda of some ship operators.During a Lloyd’s List LNG webinar yesterday the consensus was that it was not ‘if’ but ‘when’ the majority of ship owners decide to take LNG as a fuel seriously and begin to provide for it in their specifications to shipyards.Some have recognised the win-win advantages of LNG of low cost and clean emissions, and there are 119 LNG-ready ships on the current orderbook, ranging from small ferries and dry-bulk vessels to ultra-large containerships.Meanwhile, the challenge for the world’s ports is to provide the infrastructure and regulatory framework to enable ships of all types to bunker LNG during port stays.Rotterdam is the third biggest marine bunker hub in the world and has been at the forefront of the development of LNG bunkering, not just on its home turf but through collaboration with other European and international bunkering facilities.Bas Hennissen, vice-president industry and bulk at Port of Rotterdam, said: “It is important for us to be able to offer all fuel options to our customers, and we see LNG as the future for shipping, particularly because of its environmental advantages compared with HFO of a 100% reduction in SOx and 85-90% less in NOx emissions.“But this only makes sense if LNG can be offered to our customers at other hubs on their schedules,” he added.Rotterdam has been offering LNG bunkering to barge operators since 2011, and in July its local by-laws were amended to allow ship-to-ship LNG bunkering within the port.Mr Hennissen said Rotterdam was very happy to provide guidance and offer expertise gleamed from the by-law changes to other ports that faced similar challenges. By Mike Wackett 05/12/2014last_img read more