The high market uncertainty in regards with the pricing of the IMO-2020 compliant fuel and the high cost required to install scrubbers have forced Oslo-based bulker owner Bellships to hedge the bunker price differential between 0.5% sulfur fuel oil and 3.5% sulfur fuel oil, the company has announced.
Bellships says its initial hedge deal has secured exposure for 24,000 tons of bunker fuels at a fixed price differential of $198 per ton. Further to this, the company will not be required to invest into scrubbers and will not be exposed to market volatility until the fixed quantity is utilised.
Bellships has been a major player in the supramax market with a fleet of 18 supramax bulkers currently in the water and one more under construction. The cost for installing scrubbers for so many vessels would be extremely high while the vessels would need to go out of service for 3 to 4 weeks. Furthermore, the effects on its operating results would be unpredictable given the post-2020 uncertainty in the bunker market.
CEO of Bellships, Lars Christian Skarsgard, explained “We feel this is a more efficient and cost-effective way, where we will not have to take any ships out of service.”
According to a company’s statement “The bunker price differential hedge reduces downside risks and represents an efficient alternative to costly installations of scrubbers, whilst retaining full utilization of the fleet and the flexibility to adjust the position as the market develops.”
The quantity of 24,000 tons may not look much for a fleet of 18 vessels however the company is known for historically employing its vessels in the period market. Recently, after the combination with Lighthouse fleet, its chartering strategy is mixed with spot charters, where the bunkers fixed under hedge contracts will be utilised.
The company’s fleet will be physically ready by January 2020 to comply with the IMO regulation, the announcement concludes.