Lower Bunker Price Helps Operating Cost, but Not Automatically Indicating a Promising Shipping at All

The continuing fall of world’s oil price has significantly triggered a lower bunker price for shipping industry, thus finally cutting their operating cost. However, it does not indicate a better future for shipping industry at all nor automatically create a higher profit for shipping industry, according to Bani Mulia, Director of PT Samudera Indonesia Tbk (SMDR), a leading Indonesia’s shipping company.

“Today, the bunker price has significantly lowered, even lower than our contracted target in early year. This has been beginning from two weeks ago. Surely, it helps to cut shipping operating cost,” Bani said.

However, disaffirmed this will indicate a promising shipping industry at all and it will not certainly conclude that the shipping industry will come to a better performance. “We are still in ‘wait and see’. It is too early to make a conclusion,” he said, adding that the lower operating cost can run in parallel with the lower income.

“Our income will probably drop if the business of our clients is getting pressures,” Bani said.

But for sure, Bani affirmed that the lower bunkering cost due to the fall of oil price has significantly cut the operating cost which is accounted to more than 20% of the total cost.

Meanwhile, as the report said, MABUX World Bunker Index (consists of a range of prices for 380 HSFO, VLSFO and MGO (Gasoil) in the main world hubs) continued firm downward trend. On March 17, for example, the 380 HSFO was down by 6.72 point – USD/MT – 270.54 (-6.72), VLSFO was down by 14 point – USD/MT – 353.00 (-14.00), and MGO by 13.84 point – USD/MT – 437.18 (-13.84).

Meantime, world oil indexes settled below $30 a barrel on Mar. 17 as the coronavirus pandemic slowed economic growth and oil demand.

Brent for May settlement decreased by $1.32 to $28.73 a barrel on the London-based ICE Futures Europe exchange. West Texas Intermediate for April fell by $1.75 to $26.95 a barrel on the New York Mercantile Exchange. The Brent benchmark traded at the premium of $1.78 to WTI. Gasoil for April delivery lost $6.25.

The bunker prices may continue to decline in the next few days that will trigger to make the bunker price lower.

 

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