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Hi. I am a shipping company director, transport academic, author, family man and all round nice guy. I have worked as shipbroker, shipowner, freight trader and bulk charterer, in senior positions, with some of the largest and most disrespected (joke) companies in the world. Ask my advice on all things shipping and you will receive my blunt and always honest answer. Hang around to learn more about chartering and ship broker salaries, chartering and ship broker jobs, chartering and shipbroker recruitment agencies, cheap freight, maritime education, chartering and ship broker qualifications, become a ship broker, tips on how to be a successful bulk shipping executive, philosophy, Zen and the art of shipbroking, and much more. Yours The Virtual Shipbroker (recently proclaimed the guru of shipbroking) Copyright © 2009-17 by Virtualshipbroker

Monday, October 20, 2014

An excellent question about bunkers

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Dear VS,

Good day to you!

I recently graduated with a degree in Economics, and am a Trainee with a large Shipbroking firm. Am really new to the industry, and I’ve got a question for you:

In view of the current falling bunker prices, what do u reckon will the market respond, from the perspective of 1) the shipowners, and 2) the charterers (aka the cargo owners). 

Obviously the VOY equiv rates (converted from TC rates) will fall. Will owners respond by increasing the TC rates? Is only APS rates affected, only DOP, or both will be affected? From the other perspective, what will happen to the VOY rates as well?


Thanks, and will really be glad to get a response! 

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Thanks for making contact and a good question. Yes the prices of bunkers (the fuel that powers ships) has been smashed over recent months. 




As to how the market will respond? well pretty simple really. Bunkers are a cost of doing business (for the shipowner). Therefore when a shipowner rates (calculates a price) for a piece of voyage business, with low bunker prices brings a lower price. This is unavoidable. Because shipping is a fairly pure market a shipowner must reduce prices as input costs reduce. If they don't they will lose the business to the competition. 

So yes voyage rates will fall. TC rates aren't imo overly concerned with prices of bunkers. TC rates (time charter rates) reflect the balance between the supply and demand for vessels. A small reaction could be that with smaller input costs ship owners may be more willing to take the longer road to somewhere and avoid canals that have fixed costs. This will suck up supply and potentially push up tc rates. But rates are already so low and shipowners already doing this so I doubt any impact.

Your question about aps vs dop (on a tc basis) is a good one. APS rates (including BB's) should be a little cheaper because the cost to ballast includes bunkers. DOP rates on a tc basis should remain the same.

Keep rockin

VS