NCL bunker spending down despite hedging losses

Market: Oil products
09/11/16

New York-listed Norwegian Cruise Lines (NCL) fuel spending fell 3pc to $86.25mn on lower consumption, despite higher fuel prices and ineffective fuel hedging. Net of hedges, NCL's fuel price rose to $500/t in 3Q from $565/t in 2015.

The company recorded a loss of $2.5mn related to an ineffective fuel hedge it attributed to market volatility. "Recent significant weakening of certain foreign currencies, primarily the British pound, against the US dollar, combined with an increase in fuel prices, have placed pressure on expectations for the coming year", said Wendy Beck, CEO of NCL.

NCL currently has 24 ships. In 3Q, NCL retrofitted three vessels with marine exhaust scrubbers, which brought the number of scrubber-outfitted ships to five. Two more vessels are scheduled for scrubber retrofitting in the first and second quarter of 2017.

The company will introduce four news ships through 2020, also outfitted with scrubbers. According to NCL, the scrubbers reduce marine fuel sulphur emissions by up to 99pc and particulate emissions by 85pc.

The company expects to burn 182,000t of marine fuel in the fourth quarter, and 713,000t total in 2016. As of 30 September NCL hedged 91pc of fourth quarter projected heavy bunker fuel consumption off the price of US Gulf coast 3pc sulphur fuel oil at an average of $63.47/bl. They hedged 87pc of their marine gasoil consumption off of the price of Brent at an average of $35.01/bl.

The drop in NCL's bunker bill helped prop up the company's profit, which hit $342.38mn in the third quarter, up 36pc over the same period in 2015.

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