Introduction to Hedging

• Less uncertainty: Hedging instruments allow the buyer to protect themselves against market price fluctuations, i.e. volatility.
• With bunker representing 30 to 60% of the cost of running a ship, they provide greater control, rather than hazard, over operational costs. 
   
  3.5% Fob Barges NWE Historical Volatility since 2001 (one-year rolling) 

• Securing profit margins . The need to ensure the margin, through a new budgetary tool, when calculating on a specific charter.  
•                     Time saved on bunker purchasing .Within this global movement towards market specialisation, the Client can concentrate on its core business, thus being more dynamic.
•                     Bunker risk management improve a company’s creditworthiness. Banks and investors tend to prefer strategies based on controlled growth in earnings.
•                     Same opportunities: furthermore, the client may benefit of any price decreases. Depending on the strategy, the Client may buy at a ceiling while he may retain the right to buy for less than the settlement price.
•                      Hedging instruments are traded in a regulatory framework
                      Very liquid market: ability to change position quickly . In 2002, the Bank of International Settlements estimated the notional of commodity contracts at $ 800 M.

In a word, shipowners and bunker suppliers can now make strategic decisions over the long-term with greater confidence. This is a priceless competitive advantage.