Lower oil price sees massive savings for global shipping companies
Time：2014-11-03
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Cheaper oil, and hence cheaper marine bunker fuel, is saving the global shipping industry about US $100-million every day, according to analysts at BIMCO, the largest trade association for shipping companies in the world.
BIMCO forecasts that if the trend continues, with Brent crude remaining at US $86 per barrel or lower and the bunker price around US $460 a tonne, shipping lines will see earnings improve significantly in the fourth quarter.
Bunkering costs generally accounts for 20 to 30% of the total operational costs for container lines, with the lower fuel price for large container ships equating to a 10% drop in costs per container.
As a result, China Cosco, which owns the world’s fifth-largest container ship fleet, reported a 12% operating margin in the third quarter, up from 4% in the same period last year.
China Shipping subsidiary, China Shipping Container Lines, the world’s seventh-largest container carrier, recorded a 6% operating margin in the third quarter, compared with negative 2% in the same period last year.
As result of these financial results and analysts’ optimistic forecasts, the Baltic Dry Index, a benchmark for dry commodity freight cost, has gained more than 50% to 1,424 since the middle of last month.
However, at a macro-level, if the oil price remains low for a prolonged period – a usual indicator of sluggish economic growth – shipping lines will feel even greater pressure than those over the last year or so, as a slowdown in the global economy impacts international trade.
“Normally declining oil price means [slower economic growth, therefore] less demand for shipping. However, we haven’t seen such correlation this time,” said Tor Svensen at DNV GL, the world’s largest ship classification society, which also provides technical advice to the oil and gas industries. “Personally I don’t believe the current decline is long-lived. It probably will not last for more than half a year.”