Standard practice for calculating voyage cost/profit estimations in the industry is to use the actual bunker cost of the bunkers remaining onboard and estimate the upcoming bunkering price if needed. Is this the best method available? We believe it isn’t. Let’s explore this by way of an example.
Let’s imagine two vessels, one with expensive and another with cheap bunkers onboard. Let's say we have two voyage options to choose from, one with more sea days and another one with more port days proportionally. Running the voyage estimates with bunkers remaining onboard will favor doing the sea leg heavy voyage with the vessel with cheap bunkers, even if it meant a longer ballast and lower overall capacity utilisation. For fleet utilisation and profitability, however, using the vessel with more expensive bunkers and shorter ballast would likely make much more sense. This illustrates why it is optimal to always use the market price in a region for all bunker cost estimation.
In other words, as you’ll need to burn through the bunkers in your tanks regardless of the price you’ve paid for them, what’s the point in favoring a vessel with cheaper fuel onboard? Letting this dictate your chartering decisions is not only useless, it can actually be harmful as regards your overall fleet profitability.
There’s another benefit to using market prices in bunker cost estimations, and that’s the simplicity of it. In particular, the lack of need for manual future price estimates. With a more automatic bunker cost estimation capability, you’ll gain the ability to easily generate and compare multiple scenarios with multiple cargoes planned differently for multiple vessels, and further into the future.
You could even let an algorithm suggest additions (fresh off the market cargo list!) and improvements to the overall fleet schedule and performance, including bunker optimisation. The calculations are lightning fast to perform even for millions of permutations. This way you can just drag parcels around between vessels and voyages and discover the best combination with multiple factors, not only a uni-dimensionally optimised next cargo for an open position.
There can be a significant difference in the prices between Rotterdam and New York for example, hence using a combination of the prices for a transatlantic voyage is a superior solution to calculating with just the Rotterdam price. Furthermore, if you can easily take the bunkering needs into consideration in early planning, consistently higher prices in some regions will naturally favor vessel rotation between regions. This will also result in more accurate estimates, in particular for long voyages where you’ll need to bunker in several regions.
It’s of course possible to manually fetch the bunker prices for each possible future alternative bunkering port for the entire fleet. But including that in your chartering and scheduling process? Almost impossible. I very much doubt many companies are succeeding.