To Bunker Hedge?

With sincere apologies to the Bard of Avon, the above fractured quote highlights the quandary presented to the management of all companies that conduct major business operations involving highly volatile cost components that are a large part of their expense structure. In the shipping industry two of the largest cost items are subject to a high degree of volatility. Interest expense and fuel costs are these two items. Of the two, fuel costs are unquestionably the most unpredictable.

It is the nature of the maritime business that the capital assets of this industry have a finite life and each company must regenerate itself through new building programs or the acquisition of another company’s younger vessels. In some cases, no matter how well the vessel has been maintained, the owner’s customers have set a limit on the age of the vessels that it will employ. As ship operations have become more and more automated, the industry has become more and more capital intensive.

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