To mitigate the exponential costs of future fuels, bunker procurement departments need to look at all opportunities to reduce costs, starting with the initial transaction
Reducing the cost of fuel ‘at source’ needs to be included and considered as the first part of the optimisation process to mitigate against rising fuel costs, says AuctionConnect, the world’s first and leading online auction platform for bunker procurement within the shipping industry. This is even more important given the significant increase in the cost of future fuels that will drive the energy transition and enable the shipping industry to meet its decarbonisation targets.
Most procurement departments purchase marine fuels via brokers, traders or direct with suppliers. However, there is also the opportunity to utilise bunkering procurement technologies, available today and free-to-use, that simplify the complexities of traditional price negotiation, increase transparency and reduce the cost of procurement by always ensuring that fuel buyers get the best possible price. Platforms like AuctionConnect enable buyers to invite multiple fuel suppliers to bid against each other in reverse auctions and drive bunker fuel prices down below Platts’ rates. Buyers can make substantial savings on each tonne of fuel they purchase, depending on the circumstances in the market and the specific bunkering port.
With future fuels being a key element of meeting the shipping industry’s decarbonisation targets by 2050, there is increasing concern in the market of the high cost of these fuels, which could be as much as five times more expensive in 2030 than fossil fuels. This could become a significant barrier to their development and uptake and impact the meeting of shipping’s sustainability ambitions. Many vessel owners’ immediate response to this challenge is to invest in clean technology and efficiency solutions. While they are an important part of the decarbonisation process and in reducing fuel costs, they are also a significant capital investment on top of the increased costs of future fuels. Online auctions offer an easy and low-cost way for buyers to reduce fuel bills even before they consider the hardware or technology to improve energy and fuel efficiency.
Per Funch-Nielsen, Director, AuctionConnect, said: “Ship owners and operators are already familiar with the importance of using clean technology to reduce fuel consumption to mitigate against rising fuel costs, particularly in a future fuels’ world,
“Purchasing departments within these organisations now need to change their mindset in relation to fuel procurement and seize the opportunity of reducing the cost of fuel at source, which they should view as the first part of the vessel optimisation process. While the traditional elements of bunkering will always exist in the relationship between buyers and suppliers, the opportunities of digitalising and using technology for transactions are huge in creating efficiencies, transparency and reducing costs.”
AuctionConnect analysed 1.3 million tonnes fixed on the platform across a range of global ports over an 18-month period against a Platts benchmark, identifying total cost savings of $7 per tonne. In a future fuels’ world, this opportunity for cost saving is greater and even more important with the rising costs of fuel.
Funch-Nielsen concludes: “With fuel already the major constituent part of an owner’s operational costs, it is clear that any reduction in these bills is commercially critical, no matter the fuel being used. With fuel costs only rising over the coming years in line with the energy transition, reducing fuel costs, by stripping complexity out of price negotiations and increasing their transparency will be of huge value to owners and operators in an increasingly complex supply chain.”
AuctionConnect will be attending SIBCON in Singapore 8th-10th October, find them at booth B2-010.
