Maersk COO explains unit cost at fixed bunker price, outlines fuel efficiency plan

Soren Toft offers further insight into the Ocean segment's bunker-related results.

Soren Toft, Chief Operating Officer at A.P. Moeller-Maersk. Image credit: A.P. Moeller-Maersk

Updated on 18 May 2018 09:21 GMT

A.P. Moller-Maersk's chief operating officer, Soren Toft, has offered further insight into the Ocean segment's unit cost at fixed bunker price. In an analysis of the Danish conglomerate's results, Toft has provided a detailed explanation as to the reasons why the unit cost at fixed bunker price jumped $150, or 8.6 percent, to $1,895 per forty-foot equivalent (FFE) unit, including income from vessel sharing agreements (VSAs). In its quarterly report, Maersk had provided a breakdown of the reasons for the 8.6 percent rise, explaining that 2.5 percent was related to adverse exchange rate developments, 3.4 percent to changes in the portfolio mix following the acquisition of Hamburg Sud in November, and the remaining 2.7 percent primarily related to higher terminal and feedering costs. And Toft noted in his analysis that "two-thirds of it, so 6 percent out of the 8.6 percent is rate of exchange and the mix effect of Hamburg Sud. The rest is really within mainly the variable cost areas". Toft went on to explain that whilst feedering costs were higher, third-party feedering carried out by Maersk is not reflected in the fixed bunker cost. Additionally, time charter (TC) expenses also affect feedering costs. "We have higher feedering costs. You don't really see that in the fixed bunker because when we do third party feedering, the bunker cost is part of the rates that we pay. We have higher TC expenses, which also hits the feedering cost," Toft said. Maersk's unit cost at fixed bunker price is calculated by assuming a bunker price of $200 per tonne, excluding intermodal but including transhipment hubs and time charter income. Plan to improve fuel efficiency As previously reported, Ocean's bunker efficiency fell by 3.4 percent to 972 kg/FFE from last year's figure of 940 kg/FFE. Part of the deterioration, Maersk said, was due to the increased capacity committed to carrying volumes from the slot purchase agreements which are not counted as loaded volume. Referring to the figures, Toft explained that Maersk has a plan in place to improve this metric. "We will push harder on fuel efficiency over the coming quarters, as we have now fully integrated the Hamburg Sud fleet since two weeks. We'll do number of things in procurement, a number of things on improving our empty cost base and a number of things on improving utilization where it makes sense," Toft said.