| Code: 34427 |

TIN news:    According to Drewry, crude oil fell to its lowest price in five years last week. What are the potential bunker cost-savings that carriers can expect?
 
Theoretically, the recent fall in oil and bunker prices should not have any bearing on carrier profitability as their exposure to fuel cost changes should be negligible thanks to BAF "Bunker Adjustment Factor" surcharges that are meant to pass the cost on to shippers.
 
However, as most long-term industry observers will attest, in container shipping reality and theory rarely meet. Drewry estimates that carriers in general only recover about half of their fuel costs. This is because BAF is often not applied in contracts to entice new (usually big volume) customers and also because ships are never fully utilised.
 
Oversupply and trade imbalances increase the chances that the weaker leg of the round voyage will not contribute enough cargo sales to cover the fixed fuel costs, meaning that carriers are never fully compensated.
 
If bunker fuel prices were to remain constant at their current prices throughout 2015, which we accept is a big assumption; the potential fuel savings for carriers are considerable.

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