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A proposed project for the “Cooperation” of shipping companies to achieve an effective fuel strategy

Team: Poseidon

Poseidon

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Contents

Development Example The company The Bunker Box Methodology Calculations Results A variation Pros & Cons An alternative solution

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Development

MotivationBunker fuel costs account for approximately 70% of the total voyage expenditure of a vessel. (Research and Markets, 2015)

PurposeTo optimize the allocation of resources (bunkers) worldwide, and all the vessels to be given the opportunity to substantially decrease their operating expenses

Main ideaThe project locates and takes advantage of the price differences of bunkers among worldwide bunkering centers

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The project is consisted of three players:• The company• The vessel-suppliers• The customers (that request cheap bunkers)

The company matches the demand for cheap bunkers with the supply of those bunkers from bulk carriers (vessel-suppliers) , which steam in ballast, and pass by bunkering centers with cheap/cheaper bunkers

The bulkers, in order to be eligible for this process, should have to install a bunker box which will accommodate the requested bunkers and we will elaborate on it later

The demand derives from owners/operators who want their fleet to start their next voyage with lower operating expenses (bunker costs) than the price of the location their vessels are currently located

Development

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Example

• Let we assume that port of Rotterdam has the cheapest bunker price (of the requested type of fuel) of all the bunkering stations at the moment

• The customer is located in Shanghai and will cross the Pacific Ocean

• Our vessel-supplier loaded cargo in Brazil and steams to UK to unload cargo and her next route will be to load cargo at the Hong Kong port. Therefore she will first load bunkers from Rotterdam and then continue her voyage

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The company

The role of the broker (matching demand-supply) In the beginning the right marketing is needed to attract

clients and facilitate the matching process Ship owners/operators who request company’s services

should provide all the necessary information (timetables, loading-unloading schedules, positions, next routes etc.)

Bulk carrier owners/operators who will install the bunker box, can claim a higher percentage on profit (motivation and reward for the installation) and can serve both as customers and suppliers

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Software platform with constantly up-to-dated bunker prices worldwide

In each order, the company will input the data to see the potential matches

The route of the vessel-supplier should meet at a point with the customer’s one or alternatively, the two vessels should deviate from their original route the least possible

If there are any ships available, the company will contact their owners/operators to ask if they are willing to take the job

The company

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The company beside locating the cheapest bunkering stations, should further inquire their possible favorable payment options

Quick negotiation of the three parties or a fixed share on the percentage of the difference of the price

A contract has to be signed, addressing all the obligations and liabilities of each party

The company

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The Bunker Box

Is composed of a metal box and an elastic rubber balloon (which accommodates the requested bunkers)

Its volume will not affect significantly the capacity of the hold

Can be installed and uninstalled without damaging the hull The top of the box will have an inclination so as to facilitate

the cargo to move towards the center of the hold, thus creating the hopper effect.

The rubber balloon will be foldable and can remain sealed in the box with the cargo remaining intact

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The balloon will be removable and can be cleaned and reused

Can be secured in the hold to raise the stability of the ship in bad weather conditions

The outer layer of the balloon will be like (our widely known in colder countries) electric blanket to keep them liquid at around 60o

In case there is a bulk order of bunkers, the company should search for a vessel that would have more than one bunker boxes installed (one in each hold) to decrease the stresses of the hull.

The Bunker Box

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Bunker Box

Hold of bulk carrier

Entrance hole of bunkers

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Bunker Box and Balloon layout when loaded with bunkers

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Methodology

To simplify our calculations we assume that all the bulk carriers are involved in single voyage charters

Therefore they execute three routes:1. Reach the port of loading2. Transfer the cargo to the destination3. Return to its original base

As a result, the 2/3 of the voyage charter is in ballast

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Profits from the implementation of the project

No. of bulkers’ ballast routes p.a. X Average tank capacity of all the vessels X Average price difference of bunkers

For the first the data were taken from UNCTAD, Review of Maritime Transport 2013

For the second from Ship Structure Committee (Mc Alister, 2003)

For the third, the monthly averages of bunker prices for the last five months, from the website: www.bunkerworld.com

No. of bulk carriers were taken from Clarksons’ Research (2014)

Methodology

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CalculationsNo. of ballast routes per yearTotal tons of dry cargo for 2013: 4.353.523.200

Total dwt of bulk carriers for 2013: 725.010.000

4.353.523.200/725.010.000= 6 voyage charters per vessel p.a.

So, 6 voyages X 2 ballast routes (in each voy. charter) X 9.917 No. of bulk vessels for 2013 = 119.004 total ballast voyages

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Tanker vessels’ av. tank capacity of bunkers: 4.025 tons Containerships av. tank capacity of bunkers: 3860 tons Miscellaneous vessels’ (LNG, Ro-Ro, Livestock, Cruise): 5280 Bulker vessels’ tank capacity of bunkers: 2103 tons.

Average tank capacity for all the types of vessels: (4.025+3860+5280+2013) / 4 = 3.794,5 tons

CalculationsAverage tank capacity per vessel type

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CalculationsTotal average price differences

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Total average price differences by type of fuel for the last five months among the four main bunkering stations worldwide

IFO 380: 14,65 $ / tonIFO 180: 63,87 $ / tonMGO: 96,6 $ / tonLSMGO: 114,32 $ / ton

$ (USD)

CalculationsTotal average price differences

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CalculationsProfit per year per fuel type

IFO 380119.004 (ballast routes) X 3.794,5 (total av. tank capacity) X 14,65 $ / ton= 6.615.363.932 $ USD IFO 180119.004 X 3.794,5 X 63,87 $ / ton= 28.841.180.504 $ USD MGO119.004 X 3.794,5 X 96,6 $ / ton= 43.620.761.495 $ USD LSMGO119.004 X 3.794,5 X 114,32 $ / ton= 51.622.416.709 $ USD

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Average price difference per ton:14,65 (IFO 380)+ 63,87 (IFO 180)+ 96,6 (MGO)+ 114,32 (LSMGO)= 72,36 $ / ton

Therefore WITHOUT the costs of renting barges to transfer the fuel between the ships

119.004 X 3.794,5 X 72,36 =

32.674.930.660 $ USD /year

CalculationsProfit per year from the full utilization of the project for the average difference of prices of the four types of fuel

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Results

The combinations of bunker transferring between/among ships are the following:

• (1-1) One vessel-supplier to one customer• (1-2 or more) One supplier- more than one customers• (2 or more-1) The bunkers have to be loaded &

transferred to two or more different vessels to reach-unload to their sole final client

• (2 or more- 2 or more) The bunkers have to be loaded & transferred to two or more different vessels to reach-unload to more than one customers

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A variation

In the aforementioned combinations, there should be a ship available to load bunkers and its route to be convenient for the ships-customers

In order the company always to have an immediate response in serving our clients, regardless of the availability of the vessel-supplier, could strategically place bunker tanks worldwide and make deals with the vessel-suppliers to load bunkers from a specific bunkering station and unload them in the tank/tanks that they will be asked

In this case the company will have to make separate deals with each side (supplier-customer)

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Pros & Cons

Decrease the operating expenses of both players

Provide higher flexibility in shipping companies’ decision making through the increased liquidity

The demand will always be greater than supply, ensuring its sustainability

The bunker box can carry different type of fuels than the main tank of the ship

Research for the bunker box has to be done

Initial cost of its acquisition IOPP (International Oil

Pollution Prevention) certificate will be difficult to be obtained

IMO and Classification society should approve it

The possible reluctance of charterers to work with that ship on the fear of an oil spill

Pros Cons

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An alternative solution

An alternative solution would be to use the main tanks of the vessels to implement the aforementioned project

Since the ships almost never fill up their tanks for the reason that the owners don’t want to have so much tied-up capital into their tanks, we can take advantage of their spare capacity.

Even if vessels through their voyage fill the minimum quantity of bunkers, so as to refuel from the next cheaper bunkering station, the company ensures that ships can refuel with the cheapest bunkers worldwide

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The ultimate advantage in that case, is that all the vessels in the whole world can enter that business without limiting our project only to bulk carriers, and thus overcome the obstacle of the numerous coincidences that should exist in order a single transfer to take place.

Last, the large shipping companies which own numerous fleet could create a department or appoint a small team which could take advantage of the different bunker prices worldwide, and arrange transfers of bunkers among their own ships.

An alternative solution

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Thank you for your listening感謝你們的聆聽 !

Team members• Mouroutsos Stavros (莫達夫 ) – Team Leader• Le Thi Thuy Dung (黎氏翠容 )• Anita (黃鈺 )