Sailing smoothly under Sulphur fuel regulations: The shipping liner's bunkering problem

Abstract

This paper addresses the shipping liner's bunkering problem in response to International Maritime Organization's low-Sulphur fuel regulations, commonly known as IMO 2020. To minimize bunkering and inventory costs while adopting a slow steaming strategy on the sailing route, we propose a two-stage analytical framework that integrates a game-theoretic model with an optimization model. The framework also considers the uncertainty surrounding low-Sulphur and high-Sulphur fuel oil prices in the port of call decision. Our experimental results demonstrate that, when the prices of low-Sulphur fuel oil (LSFO) and high-Sulphur fuel oil (HFO) increase by 40%, the total cost and bunkering cost increase by 3.88% and 4.77%, respectively. Conversely, a 10% decrease in fuel prices leads to a substantial 9.79% and 10.27% drop in total cost and bunkering cost, respectively. Additionally, the experiments consider the mandatory requirement of LSFO, making the results highly relevant and informative for the liner shipping industry. Moreover, this study provides a comprehensive and insightful approach to address the bunkering problem, facilitating the compliance of the IMO 2020 regulations while minimizing costs for shipping liners.