Joint Maritime Bunker Hedging and Operational Consumption Based on CVaR Optimization

Abstract

Maritime shipping is an important driver of global economic growth. Efficient green maritime technologies are critical for both the profitability and sustainability of shipping carriers due to the fact that fuel consumption has already made up 45–55% of the total operational cost of a ship. Moreover, the application of green maritime technologies also challenges the input/output of the maritime industry. Currently, there is a lack of coordination between the two strategies of maritime bunker management: one is the bunker procurement, which is faced with the fierce volatility of bunker fuel prices, and the other is the bunker consumption of vessel operation scheduling with applicable maritime technologies. To address the challenge posed by the new sulfur emission regulations, the two isolated strategies are inefficient. This study presents an integrated model that takes both the financial technology (bunker hedging) and the operational bunker cost efficiency (sailing speed and routing optimization under emission regulations) into account. The objective is to maximize the total rate of portfolio return considering the revenue and the cost simultaneously. By analyzing the Conditional Value at Risk (CVaR) risk measure, we examined the effects of the bunker spot, contract, and hedging in futures markets on the optimal joint solution. Numerical results from a real-world case study show that the optimized integrating financial and operational strategies yield the lowest expected total costs as well as the highest revenue with CVaR constraints. The findings provide a prospect for maritime shipping as an effective decision tool for bunker management under environmental regulations. The management insights of our study will benefit the corporate participants, policy makers, and researchers in liner shipping revenue and risk management.