What is a bunker?
A bunker is the fuel a ship burns to power its main engine, generators and boilers, and the term covers both the fuel itself and the act of loading it on board. In day-to-day chartering language, bunkers means marine fuel, and the bunker bill is one of the largest single costs of running a vessel.
The word survives from the age of steam, when ships carried coal in storage compartments called bunkers and the labour of loading it was called bunkering. The compartments and the cargo changed, but the name stuck. A modern bulk carrier no longer shovels coal, yet it still bunkers fuel oil or distillate into tanks before a voyage and tops up along the way at major bunkering ports.
Bunkers matter in chartering for two reasons. First, fuel is the biggest variable cost of a voyage, so the price of bunkers feeds straight into the freight rate an owner must quote to break even. Second, the question of who buys and pays for the fuel is one of the cleanest dividing lines between charter types, and it shapes the whole risk allocation of a fixture. Both of those threads run through the sections below.
Marine fuel types
Marine fuel splits into two broad families. Residual fuels are the heavy, viscous bottom of the refining barrel and must be heated before they will flow. Distillate fuels are lighter, cleaner products closer to diesel that need no heating. Sulphur content is the regulatory dividing line that decides which fuel a ship may burn and where.
| Fuel | Sulphur limit | Typical use | Notes |
|---|---|---|---|
| VLSFO (very low sulphur fuel oil) | 0.50 percent max | Main engine outside emission control areas | The dominant compliant fuel for ships without scrubbers since IMO 2020 |
| HFO / HSFO (heavy / high-sulphur fuel oil) | Up to 3.50 percent | Main engine on scrubber-fitted ships | Only legal as marine fuel if the ship runs an exhaust gas cleaning system |
| MGO (marine gas oil) | 0.10 percent max grade available | Manoeuvring, ports, emission control areas | A distillate, cleaner and lighter than residual fuels, no heating needed |
| LNG (liquefied natural gas) | Effectively zero sulphur | Dual-fuel newbuilds | Alternative fuel; needs dedicated tanks and a growing bunkering network |
In practice most conventional bulk carriers burn VLSFO at sea and switch to MGO for port manoeuvring and inside emission control areas where the limit is tighter. Ships fitted with a scrubber can keep burning cheaper high-sulphur fuel because the scrubber cleans the exhaust to a compliant standard. LNG is the leading alternative fuel today, carried by a small but growing share of dual-fuel newbuilds, with methanol and ammonia under active development behind it.
The IMO 2020 sulphur cap
On 1 January 2020 the International Maritime Organization cut the global limit on sulphur in marine fuel from 3.50 percent to 0.50 percent by mass. The change is known across the industry as IMO 2020, and it was the single biggest shift in marine fuel in decades. Sulphur in exhaust forms sulphur oxides, which harm health and the environment, so the cap was set to reduce those emissions sharply.
Inside designated emission control areas the limit is stricter still at 0.10 percent. These emission control areas, also called sulphur emission control areas or SECAs, cover sensitive coastal regions such as the Baltic Sea, the North Sea, and the waters around North America. A ship trading into one of these zones must burn fuel at or below the 0.10 percent limit while inside it, which usually means switching to a low-sulphur distillate such as MGO.
The cap reshaped fuel pricing. VLSFO trades at a premium to the old high-sulphur fuel, and that premium, called the spread, is what makes a scrubber pay back. When the spread is wide, scrubber-fitted ships earn a fuel-cost advantage that flows through to their competitiveness on the charter market.
What bunkering is
Bunkering is the physical operation of transferring fuel into a ship’s tanks. It is a routine but carefully controlled procedure, because fuel is loaded in large volumes and any spill is both an environmental incident and a costly one.
Fuel reaches the ship in one of two ways. The most common is by barge: a small bunker tanker comes alongside the vessel, often while it is at anchor or working cargo, and pumps fuel across through hoses. The alternative is by pipeline at a dedicated bunkering berth, where the fuel runs directly from a shore terminal into the ship. Truck delivery exists for small quantities but is rare for ocean-going bulk carriers.
Before and during the transfer the crew checks the quantity and quality of what is delivered. The quantity is recorded on a bunker delivery note, and a sample is drawn and sealed so it can be tested if a dispute arises over off-specification fuel. Quality matters because contaminated or off-spec bunkers can damage the main engine, and a fuel dispute can stall a voyage. Major bunkering hubs such as Singapore, Rotterdam and Fujairah supply much of the world’s marine fuel, and owners plan voyages to take fuel where it is cheapest and most reliable.
Who pays for bunkers by charter type
The question of who buys and pays for bunkers is decided entirely by the charter type, and it is one of the clearest ways to tell the instruments apart. The rule follows control: whoever directs the ship’s speed and route pays for the fuel that the speed and route consume.
Under a voyage charter the owner pays for bunkers. The owner keeps operational command of the ship, chooses the route and speed, and carries the cargo for a freight rate quoted per tonne. The fuel cost is the owner’s, recovered through that freight rate. This is why the bunker price is a direct driver of the freight rate: when fuel is expensive, owners must quote more per tonne to cover it, and a sharp move in bunker prices can swing voyage economics within a single fixture window.
Under a time charter the charterer buys and pays for bunkers directly. The charterer hires the ship for a period at a daily rate of hire and takes commercial control, deciding where the ship goes and how fast. Because the charterer makes those decisions, the charterer also buys the fuel, and a slow-steaming charterer who burns less fuel keeps the saving. The owner provides the crewed and maintained ship; the fuel bill sits with the charterer.
The bareboat charter pushes this further still: the charterer takes the bare ship, crews it, maintains it and of course buys all its fuel. Across all three instruments the pattern holds. Bunkers follow control of the voyage, and the charter party’s bunker clause is where the parties write down exactly how that fuel is handed over and paid for.