A planning framework for bunker risk management : hedging in bunker risk management integrated network

• Main Author: Du, Jing.
• Other Authors: Teo Chee Chong
• Format: Final Year Project
• Language: English
• Published: 2013
• Subjects: DRNTU::Engineering::Maritime studies::Maritime management and business
• Online Access: http://hdl.handle.net/10356/53883
• Institution: Nanyang Technological University

As bunker is the predominant bulk of liner operation costs, it is increasingly difficult to yield a stable income for liner ship-owners given the ever-skyrocketing fuel prices. Operational measures such as slow steaming can no longer counteract the rising fuel cost efficiently. Bunker Adjustment Factor (BAF) though an industry practice now, does not deliver optimal customer service as ideally could. As a result, hedging has become increasingly significant in bunker risk management in liner shipping market. However, hedging is still in its infancy stage for maritime industry hence a lack of research in general. This report focuses on hedging and discusses how it contributes to the integrated framework by studying the optimal hedge ratio and evaluating the hedge effectiveness. The results show that by incorporating an optimal hedge ratio into decision-making, companies can reduce bunker risk more effectively. From an aspect of organizational behaviour, the integrated framework encourages effective communication among departments hence promotes healthy collaboration in the organization and enhancing financial performance.