Abstract:
Shipping is assumed to be one of the risky business and its market is very much volatile. Various players are there in the shipping market such as ship owners, ship operators and other parties need to manage these risks which occurs from the fluctuations in bunker prices, freight rates, interest rates, foreign exchange rates and prices of the vessel fluctuations affect the cash flows of ship owners and ship operators this lead to less cash flow in their accounts.
Earlier bunker costs was not taken into consideration but now it has turned into the major problem for the ship owners. According to bunker cost studies it has been proved that bunker oil plays a vital role in the shipping industry. Bunker oil account for 47% or sometimes even 50%. Any change in Dollar rate lead to -/+5$ change in bunker prices.
Now many ways are there to reduce the fluctuation in bunker costs. Fixing the shipping routes in advance at a prescribed at an agreed speed and certain kind of ship, it is requirement of managing bunker costs is to reduce and control arising from the fluctuations of bunker prices which reflect the balance of supply and demand of bunker level.
Managing the bunker cost fluctuation is most important activities in shipping company to make a profit. Bunker price is becoming less predictable and fluctuates very much even in a very short period of time.
Managing bunker price effectively and reducing is a tough job risk?
Hedging bunker price fluctuation is the best method to solve this question moreover in this dissertation more focus has been given to overcome the issues related to hedging bunker prices. Hedging, through forwards, future, swaps, cross hedging etc.
