The volume of global trade is increasing at a sharp rate and ships are still the preferred mode of transport for freight and cargo. Bunker fuel takes over precedence in the area of freight shipping as they are the primary source of energy to fuel large vessels. Various grades of bunker fuels are available to fuel ships, where the highest grades such as marine diesel oil are used in navy vessels, boilers, and furnaces and lower Bunker C is used as bunker fuel. Although there seem to be good growth prospects for bunker fuel market, suppliers are facing various procurement and supply chain problems.
Challenges in Bunker Fuel Market
Regulations Pertaining to Bunker Fuel
Currently, this fuel oil is one of the most polluting fuels available in the market. The fuel obtained from crude oil distillation has the highest amount of impurities and carbon producing over 3,500 times more pollutants than gasoline. To control such pollution, several organization such as IMO and EPA have imposed stringent regulations on the emission of such pollutants.
Volatility in Crude Oil Prices
Bunker fuel prices are highly correlated with crude oil prices. The political instability in the Gulf region and shale gas revolution in the US have resulted in price volatility in bunker fuel market. The suppliers and the buyers in the market are looking for alternative fuel sources such as solar, wind, and LNG to offset this price volatility.
High Toxicity of Bunker Fuel
All grades of bunker fuel are highly hazardous and adversely affects human health. For instance, Bunker C may release or contain chemicals such as hydrogen sulfide, which can prove fatal to humans if inhaled at a certain concentration. It also contains several other chemicals that can irritate eyes, skin, and respiratory system. To combat this problem authorities, certain safety protocols have been implemented, which increases the operational cost and compliance costs for the suppliers.
Constant Occurrence of Spills
Bunker fuel is a dense, viscous fuel often produced by mixing fuels HFO and LFO. HFO is a persistent oil and only 5%–10% evaporates within the first hours of a spill while the rest stays in the water, endangering aquatic life. Constant occurrence of spills forces the buyers to pay hefty penalties and also interrupts their operations.
Read more about the challenges in bunker fuel market along with key suppliers of bunker fuel, procurement best practices, bunker fuel price history, sourcing strategy, and procurement insights in SpendEdge’s upcoming report on the global bunker fuel market.