Shipping costs and charter rates for container vessels and bulkers are at a high level for some time now. In many meetings and discussions, we sense that many expect the rates to drop at some point.
Recent research by ING bank however shows this hope may be futile. One of the main reasons why rates will probably not return to pre-pandemic lows are higher future fuel prices.
Also CO2 - pricing and low-carbon fuels will certainly lead to higher fuel costs. Currently marine fuel prices have also risen significantly over the last year, leading to higher operational cost. In below graph, it can be seen that bunker prices are on the rise and trade 50-75% higher year on year.
As the fuel bill can easily reach 50% of total cost in (container) shipping, we may be looking at a permanent higher shipping costs, also after the capacity issue and pandemic is behind us.
In their research, ING also expects trade growth rates to return to their pre-pandemic levels in line with a continued global economic recovery, while average containerised transport costs are expected to remain high.
Another thing is the impact of Emission Trading System. The EU-ETS future prices (in EUR per ton CO2 emitted) has shown a significant increase from about 30 EUR to 95, as can be seen in below graph.
Given the fact that burning 1 ton of fuel equals 3 tons of CO2 emitted, the tax on every ton of fuel will be 3 times the ETS price, or about 300 dollars per ton of fuel.
This is adding about 40% on the current VLSFO price!
With fuel costs rising, investing in improving fuel efficiency now makes perfect business sense.
As an example, a vessel with a 20MT daily consumption and 220 sailing days per year nowadays has an annual fuel bill of 3,2 Million dollars*.
Assuming a monthly 400 EUR spend per vessel on running an advanced performance solution, you would only need 0,17% bunker savings to compensate for the costs.
On average, we see a 3 to 5% improvement in efficiency after the implementation of our solution. These are the results of small changes, such as sailing at a more optimal speed and early detection of mechanical issues or hull fouling.
And as 3% to 5% saving will result in over 91,000 to 155,000 US$ annual net saving per vessel, it is easy to understand the logic behind using an advanced performance monitoring solution.
Assuming a price increase of 300 USD/MT as a result of the ETS, a 3 to 5% saving will result in an annual net saving of 149,000 to 252,000 USD per vessel.
Want to accelerate the journey to boost fuel-efficiency of your fleet and save costs? Get in touch with us for a tailored pilot, where we demonstrate your saving potential based on real-time monitoring of your owned or chartered vessels.
Or first discuss your personal business case with us in a free consultation meeting. just drop us a message via firstname.lastname@example.org.
Link to the full ING Trade Outlook 2022 report here.
Fuel prices source: Global 20 Ports Average (https://shipandbunker.com/)
EU-ETS Pricing: https://ember-climate.org/data/carbon-price-viewer/