SeaIntel: Oil gains can become an expense in 2016

There is a time lag between the decline in oil price and the decline in rates in the container industry. The mechanism gave container carriers a one-time profit of USD four billion in 2015. But this will not necessarily be the case again this year, writes SeaIntel.

Photo: Hanjin

Container carriers were able to note a one-time profit boost of USD four billion in 2015 which is attributable to a time lag effect between oil prices and rates, whereby there is a delay before changes in bunker prices and until the rates materialize. According to SeaIntel, this amounts to a lag of three months, writes the analyst firm in its latest update on the container market.

Specifically, this lag means that when the oil price drops, carriers temporarily buy oil at lower rates than they are 'selling' it for through lower freight rates. This oil price decline generates a profit for the carriers, which last year amounted to USD four billion. The mechanism, however, also works the other way. When the oil prices increase, the carriers will take a loss, writes SeaIntel.

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