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BUNKER INDEX :: Price Index, News and Directory Information for the Marine Fuel Industry
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Stolt Tankers sees profit drop by a third on higher bunker prices

Bunker costs rose by 21.4% between December and May.

The Stolt Virtue was refuelled during the first concurrent bunkering operation at Stolthaven's facility in Jurong Island, Singapore, on January 30, 2018. Image credit: Stolthaven Terminals

Updated on 05 Jul 2018 10:05 GMT

Stolt Tankers reports that higher bunker prices in conjunction with lower results for its deep-sea fleet resulted in the firm's operating profit dropping by a third during the first six months (H1) of its fiscal year, which runs between December 1 and May 31.

Operating profit fell $18.7 million, or 33.3 percent, to $37.4m in H1, with Stolt Tankers explaining that the rise in marine fuel prices and deep-sea freight rate decline had been partly offset by higher bunker hedge gains and spot rates.

Bunker costs in H1 increased by $22.7 million, or 21.4 percent, to $128.7m.

The average price paid by Stolt Tankers in H1 for intermediate fuel oil (IFO) rose by $63, or 20.2 percent, to $375 per tonne, compared to $312 in the prior-year period.

Bunker surcharge and hedging gains

Stolt Tankers reports that bunker surcharge revenues in H1 increased by $11.5m year-on-year.

The gain from bunker hedging in H1 was $8.9m, compared to $0.2m during the corresponding period last year.

Roughly 69 percent of Stolt Tankers' total volume in the first six months of 2018 was derived from contracts of affreightment (COAs), whilst the profitability of spot contracts and COAs without bunker fuel adjustment clauses - which comprised 38 percent of company revenue - was directly affected by changes in fuel prices, the chemical and parcel tanker specialist said.

Stolt Tankers noted that its policy will be to hedge a minimum of 50 percent of expected bunker purchases within the next 12 months through either bunker surcharges included in the COA or hedging actions.

The company explained that in periods where bunker prices are below the agreed COA price, the use of bunker fuel adjustment clauses results in Stolt Tankers reimbursing customers for fuel prices.

The tanker vessel operator added that it enters into bunker hedges with the goal of hedging that portion of its bunker exposure not covered by bunker surcharges.

Stolt-Nielsen results

In its key results for H1, Stolt Tankers' parent company, Stolt-Nielsen, posted a rise in net profit of $17.5m, or 56.7 percent, to $48.4m. Operating profit was up 3.4m to $103.4m.

Commenting on the results, Niels G. Stolt-Nielsen, chief executive officer of Stolt-Nielsen Limited, said: "SNL's underlying operating results in the second quarter remained largely in line with our expectations. At Stolt Tankers, we have thus far successfully compensated for rising bunker prices through the bunker hedge programme, but rising bunker fuel costs continue to eat into tanker earnings, as spot rates have not yet fully responded to the increased cost of bunkers."

Looking to the future, the Stolt-Nielsen CEO observed: "The chemical tanker market appears to have bottomed out, but rising bunker prices will continue to have a negative impact on earnings until spot freight rates begin to reflect the higher cost base."

Related Links:

Stolt-Nielsen Gas chief bullish on firm's future role in LNG bunkering
Stolt-Nielsen posts 50% jump in bunker costs as annual net profit is more than halved
First concurrent bunkering operation performed at Stolthaven Singapore
Stolt-Nielsen orders two dual-fuel ships, with options for another three

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