Since the announcement by the united states government of a new sanctions programme against iran, global oil prices have continued to surge, leading to higher fuel costs in the shipping industry. In the recent past, the continued increase in the price of bunkers significantly affected the liner operating environment, which was 50 per cent higher than in the same period in 2017. In response to the cost pressure of soaring fuel prices for ships, liner companies have imposed emergency fuel surcharges or higher freight prices, resulting in excessive logistics costs for foreign trade enterprises。
Since the announcement by the united states government of a new sanctions programme against iran, global oil prices have continued to surge, leading to higher fuel costs in the shipping industry. In the recent past, the continued increase in the price of bunkers significantly affected the liner operating environment, which was 50 per cent higher than in the same period in 2017. In response to the cost pressure of soaring fuel prices for ships, liner companies have imposed emergency fuel surcharges or higher freight prices, resulting in excessive logistics costs for foreign trade enterprises。
Fuel is an indispensable source of life for ship transportation. Oceanic freighters that sail around the world are mostly fuel-driven and account for up to 90 per cent of ship consumption. The data show that the overall shipping industry currently consumes about 320 million tons of fuel annually。
In recent years, the pattern of world oil consumption and trade has undergone profound changes, with asia-pacific accounting for one third of world oil consumption. China is the world's largest importer of crude oil, the second-largest consumer of crude oil and the eighth-largest producer of crude oil, whose external dependence is close to 70 per cent and rising。
The price of any commodity cannot be dissociated from its supply and demand situation, as does crude oil, but the supply of and demand for crude oil is influenced not only by new production capacity, economic cycles, technological innovations, etc., but also by the power of big powers to play and to play politically. The use of iran by the united states government to stir up the situation in the middle east and the domestic demand for tax cuts for capital pull will drive further increases in crude oil prices, which are currently about $100 per ton higher than during the same period in 2017。
What impact would this have on the shipping market if the price of crude oil had reached its historic high in 2008 when extreme conditions had prevailed? Would the expectation of higher crude oil prices be a boost to the long-month contract for derivatives from shipping?
The topic of fuel costs has replaced supply and demand conflicts and is currently at the centre of concerns of relevant enterprises, such as shipping logistics. Some shipowners, logistics and financial practitioners were invited to talk about the impact of higher crude oil prices on shipping prices and the responses to them。
China ocean holdings ltd
Board of directors/general manager's office manager, lin wingsong:
Fuel costs are an important cost expense for liner companies, and an increase in crude oil prices will put a rigid cost escalation pressure on liner companies, such as cost-led pricing, which will reduce the space for downward price reductions for liner companies and support transport prices. However, the actual price formation mechanism is extremely complex, and it depends not only on the liner's own cost structure, but also on the fierce game of multiple market pricing agents, who should avoid falling into the “prisoner dilemma” and rushing the source through blind price-fixing。
In fact, from 1998 to 2018, the nominal transport price in the china export container price index fell by about 20 per cent; however, a departure from the cost of fuel sometimes occurs when consideration is given to reducing the basic shipping charges for fuel surcharges by more than 50 per cent. An analysis of the conduct of liner players in the pricing process is carried out through the “think pig game” model, with leading liner companies with market shares taking the lead in pricing and forming pricing poles; other liner companies have adopted a “follow-pricing” strategy, and pricing based on their own brand positioning, price gradients, market expectations, etc., following the determination of pricing poles is the rational choice of both sides to achieve nash balance in the game. Rational, self-regulatory business behaviour of liner companies with pricing rights is particularly important in promoting the sustainable and healthy development of the industry。
Where are you going
Fuel costs typically represent 20 per cent or even more of the total costs of liner companies. There is no doubt that the rise in oil prices has increased the burden on liner companies ' costs, leading to an increase in shipping costs as well. Starting in june, major liner companies have raised emergency fuel surcharges of about us$ 50/teu, which is an unprecedented collective collection, and this problem is already very serious。
If oil prices continue to rise in the second half of the year, it is not excluded that liner will further increase the fuel surcharge rate. For downstream shippers, the issue required close attention, and consideration could be given to avoiding sharp fluctuations in freight costs, inter alia, by negotiating long-term contracts。
At the same time, from historical experience, every rise in oil prices is a key time point for the upgrading of the shipping industry. It is believed that next, parties in the logistics industry will place greater emphasis on technological upgrading to reduce reliance on traditional oil through measures such as clean energy and ship optimization. From this perspective, while there will be short-term skirmishes, in the long run, rising oil prices may not be “bad enough” for the shipping industry。
New lake futures ltd. Headquarters operations centre
General manager, department of institutional management, chen chun lin:
What we are talking about here is the international shipping fuel market, the bonded fuel market. Fuel prices are more heavily influenced by local supply and demand, import plans, stocks, price expectations, contingencies, and, above all, crude oil prices. Singapore's fuel prices are highly consistent with brent's crude oil trends and are relevant at least 0. 7。
Fuel costs are the largest of liner companies, typically accounting for 20 ~60 per cent of shipowner direct operating costs. Shipowners are concerned about oil prices and are highly sensitive to changes in oil prices。
In the first half of the year, singapore's oil tanker, 380 pd, went up by about 20 per cent with crude oil prices. Overall, shipping prices did not follow up on oil prices in the first half of the year, owing, for example, to the continuing downturn in the current global shipping market and the intense competition in the industry. The impact factors on oil prices have a lower weight in freight movements, a generally lower profitability in the maritime industry and no signs of improvement in the short term。
Mr. Tang, market commissioner of a financial institution:
With high fuel prices and the entry into force of sulphur limitation, liner companies face high-cost pressures. Previously, liner companies had imposed emergency fuel surcharges to mitigate cost pressures. In recent days, the liner companies have raised their prices at hand and several liner companies, including daffodil and herbrote, have issued successive notices to increase their prices as of 15 august, with the united states shipping line increasing significantly to a maximum of $900-1266/feu。
In recent years, especially during the rapid rise or fall in oil prices, it has become difficult for liner companies to control the risks of large fluctuations in fuel costs. Retroactive to historical oil price trends, oil is not only an energy commodity but also an instrument of profitability for financial giants. As a result of the high international oil prices, liner companies will face a rapid rise in fuel costs, which, assuming 10 per cent volatility in oil prices, could cost hundreds of millions of dollars more. Fuel costs are more significant than operating costs, and higher transport prices are reasonable。
There are a variety of ways to save, mainly through price fixes, centralized procurement, route planning and speed optimization. Different price-fixing strategies are the main reason for the fuel cost gap among liner companies. It has been reported that the strategy of hedged 80 per cent of fuel purchases in herberot, which had led to the lowest price for fuel purchases in the enterprise, has at one point caused other enterprises to worship。
In march, crude oil futures were successfully listed on the shanghai futures exchange and operated smoothly, with some impact on the international crude oil futures market. The shipping price derivatives introduced by shanghai shipping price trading ltd. Provide an effective price risk management tool for enterprises in foreign trade logistics to avoid the risk of going-on operations, and the firms concerned may choose to use finance as a hedge tool to achieve hedging to effectively control the costs of hedge price fluctuations。
[crowding]
“the tide is wide and the wind is rising”. With the rapid development of the shipping industry, the demand for bunkers will continue to grow and the cost of fuel will continue to surge. The reduction of energy-saving emissions and the development of new, clean and efficient energy vessels are imminent. Moreover, the rational use of the derivatives of shipping prices by shipping logistics and foreign trade enterprises to avoid the risk of price fluctuations is undoubtedly a good approach. In the light of the situation, the situation has changed, and there is no difficulty in overcoming it。
