Should bunker prices dictate the industry's priorities?
5th March 2015 12:00 GMT

There has been a lot of speculation in the last few months about how the fall in bunker prices could affect those shipowners and charterers investing - or planning to invest - in clean technologies and the clean technology companies themselves. I will be the first to admit that one of the key benefits NAPA has been championing in recent years is the relatively short payback period on software that can deliver fuel savings at the sustained high prices we were seeing.
 
However, we should not forget the damage done to this industry and our joint fortunes following the economic crash in 2008. As we all know, the shipping industry was riding high upon the boom in global trade and low fuel costs. In such buoyant economic conditions, many threw caution to the wind, only heightening the industry’s subsequent struggle to recover when the tide turned.

To say recent market conditions have been challenging would be an understatement. But together the industry is managing to get through it, teaching us in the meantime that pragmatism and innovation can indeed stem from adversity.
 
A vessel is a 20-30 year asset investment, and one requiring significant outlay and upkeep over that time. As such accurate and useful data on how that investment is performing will never cease to be relevant and invaluable to its owners and operators. Particularly at a time when, as scientists and economists never seem to tire of reminding us, the next thirty years present the shipping community with significant challenges. Some we can already see and plan for, such as incoming regulation from the IMO and EU, for example reduction in the sulphur content of fuel burnt in ECAs and eventually across the world, and reducing carbon. Others can only be predicted; whether fracking will continue to flood the market with low-cost LNG, or if global conflicts will once again drive oil prices up.

We are an industry that has been bitten by unexpected economic impacts and, as the old saying goes, once bitten twice shy. On a practical level, savings and opportunities continue to abound even at current fuel price levels. The introduction of 0.10% ECAs and the new costs they represent to the vast majority of vessels (even if is only for a small proportion of their time) as well as the unpredictable nature of energy costs require long-term not near-term thinking; teaching us not to settle for what works for now, but to seek mitigation strategies for the long road ahead.

Together we must keep planning for the future, both expected and unexpected, to move our industry forward. At NAPA, we have seen the achievement of substantial fuel savings, including the benefits of software optimisation on the existing fleet through ClassNK-NAPA GREEN. This reminds us that technologies and collaborations will drive the shipping industry forward to a new, more progressive footing, similar to the evolution of other transportation sectors.

High fuel prices opened the door of opportunity to the shipping industry but even with the cost reductions we’ve seen in recent months, bunkers remain the largest component of vessel running costs. Now is not a time for short-term thinking. As these lower bunker prices have a positive impact on profitability for ship owners and operators, they have to opportunity to turn it to their long term advantage; freeing up capital to invest in fuel efficiency for the future of their business.


Esa Henttinen,
5th March 2015 12:00 GMT

Comments on this Blog
Heinz Otto - Windships
6th March 2015
Hi Mr. Henttinen,
to your conclusion I have added: "AND Sailsystems" - so These are the words, to meet a less CO2-emission-Future of maritime Transport:
as you said: "freeing up capital to invest in fuel efficiency AND Sailsystems for the future of their business.
Please read "negotiating_text_12022015@2200-PARIS-COP-21", where the IMO is forced to set CO2-reducing-goals.
Regards, H.Otto, windships.de
Caroline Clarke - SCM Services Pty Ltd
6th March 2015
salutations
Esa Henttinen conveys a sense of vigilance in the values of measuring with the many well noted to be sure...

Australia is in the process of committing 2.55 Billion as part of its Emission Reduction Funding of new projects Action Plan - the commitment includes National Coastal Shipping. SCM Services a member of http://www.carbonmarketinstitute.org/ has attended various plenary engaging stakeholders contributing submissions appreciating the principal values endorse and appreciation on recognised national and international measures.

SCM Services continues to engage with Australia's Peak Body https://shippingaustralia.com.au/ advocates CEO Mr Rod Nairn whose strengths attest 'We Know Shipping. The major focus of Shipping Australia, as a peak industry body, is both to promote and advance the interests of shipowners and shipping agents in all matters of shipping policy, environmentally sustainable practices and safe ship operations.' matters pertaining.


The speak of the regulator at the most recent Policy Working Group Meeting held at the offices of Clayton UTZ Melbourne 19th February outlined the funds may very well be taken up in the first round.

Aggregation materiality getting the members on board the Auction due less than six weeks away 15th April 2015 we don't like to leave anybody behind...

We trust this is of assistance to you and thank you for sharing kind regards
Caroline Clarke
http://wwwscmservices.net

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