With global trade reaching unprecedented heights, maritime transport is still the most preferred method of moving cargo. Bunker oil is the primary fuel for this industry and it is available in various grades. Maritime operators can choose a suitable grade depending on the type of vessel. For example, high-grade marine diesel oil is suitable for navy vessels and furnaces while lower grade bunker fuel is more preferred for containerships. Despite the growth in demand for this sector, there are many impending challenges that may affect the supply and pricing. Bunker oil prices have become increasingly volatile in the past few years and it is difficult to determine the relationship bunker prices have with the current market. Below we present some key issues faced by this industry.
Growing Volatility in Bunker Price:
Bunker fuel prices have fallen significantly in the last couple years. However, there is still a lot of pressure and uncertainty over the supply. Prices are changing regularly due to global supply/demand ratios and political instability. These factors affect the profitability of both the shipping operators and bunker suppliers. In this market, credit risk is also a huge challenge. Bunker suppliers carry the vulnerability of pricing throughout the supply chain. In this scenario, tightening margins and creditworthiness of the end consumer can significantly impact the business. Shipping companies prefer working with reliable oil suppliers while the bunkering companies look to get better credit for offloading the burden of cost. It is important that the supply chain of any company works efficiently for all those involved to make sure that there is a low chance of things going wrong. Visibility, automation, and analytics are just a few of the factors that make up supply chain innovation for optimal output.
Regulations:
Bunker oil is a residue of crude oil and it remains unrefined. It is a heavier fuel and contains a high carbon content that is emitted during combustion. Leading international organizations have laid stringent regulations on the level of emissions caused by this oil. These regulations can have a significant effect on bunker oil price as well.
Growing Operational Challenges:
Many shipping operators experience substantial issues during the bunkering process. Companies should opt for an experienced supplier having proper data on fuel quality and availability to build trust and transparency. There are also increased operational costs and procedures that should be factored into the price of bunker fuel. Suppliers have to follow the safety protocols specified in this regard. All these factors have been involved in the upsurge of operational costs over time.
Shipping companies can mitigate their issues by joining hands with a trusted supplier. Reliable suppliers follow the best practices and ensure cost effective-fuel supply to buyers.
