6 Ways for Shippers to Reduce Bunker Costs
It’s no secret – shipping is going through a tough time. And in tough times, owners and operators need to do everything they can to help the bottom line. The industry has been rife with consolidations, bankruptcies, acquisitions and downsizing. But what else can shipowners and charterers do to become more profitable?
The cost of bunker fuel is an easy place to start. Fuel accounts for a whopping 60-80% of the cost of a voyage. So what are the ways an owner can reduce these costs?
1. Slow Steaming
This is an obvious one. Drag on a ship reduces “quadratically” with the speed, which is a fancy way of saying that going at twice the speed uses 4x as much fuel due to the increased drag. Slow steaming is typically done at 18 knots – anything less is considered ‘super slow steaming’. Dropping speeds on a cargo ship from 27 to 18 knots can reduce fuel consumption by 59%. Bottom line – if you can afford the extra time, its worth slowing down.
2. Use an intermediary
This might seem less obvious. Why use an intermediary when you can do it yourself? The value of using a buying service such as BunkerEx or a broker is that they can get you a bigger discount than the cost of their fee. A good channel will have strong relationships with suppliers and valuable information at hand to advise their clients on when to buy, who to buy from and who to avoid. Studies show that using a intermediary reduces the risk of a claim, so in the long run they can reduce your bunker costs significantly. With our online platform, there are no fees for buyers and supplier fees are fixed and transparent, creating a strong incentive to obtain the lowest price.
3. Account for the “Extras”
Barge fees, calling costs, port charges and extra fees can significantly increase the “per metric tonne” price quoted. It’s important to bunker in the most efficient location, taking into account all extra charges and measuring this against the cost of deviating to the anchorage or another port. Using the latest port mapping technology and calling cost API’s, our system can quickly compare and determine the cheapest bunker port once all extra charges are taken into account.
4. Increase supply chain transparency
Many bunker purchases contain middle-men between the vessel and physical supplier. Every extra person in the chain will take a fee. To reduce your costs, it’s important to understand who these middle-men are and what value they bring to the delivery. Ensure all participants are adding value along the chain, and that you’re not indirectly losing on extra fees and commissions.
Using a fully transparent platform like BunkerEx (www.bunker-ex.com) allows you to control who you are buying from, with no risk of paying higher fees than needed. This ultimately results in greater savings for the owner or charterer.
5. Cover more suppliers in the market
Relying on bunker experts (i.e. brokers, traders or in-house buyers) is recommended, but it’s important they have covered enough of the market to create a more competitive enquiry. A lot of brokers will continue to re-use the same suppliers again and again. Although this might be comfortable for them, complacency often results in higher prices.
With BunkeEx, we tell you who all the reputable suppliers are, and let you decide how many you want to cover. This ensures increased competitiveness for your bunker stem and almost always results in cost savings.
6. Reduce the risk of claims
Every supplier you deal with should have a solid track record. It’s important to constantly monitor all supplier’s trading activity, their claim ratios and if they have had any recent issues or key personnel changes.
BunkerEx vets and and tracks all of our suppliers and traders 24/7 to reduce the risk of a claim and ensure smooth operations. Bunker systems with a clean and well-run process for choosing suppliers will always be less likely to cause a delivery dispute and hence create savings over time.