• Shipping must shift from static to adaptive decision-making as markets become more volatile.
• Voyage planning must account for multiple operational, economic and sustainability variables.
• AI-driven voyage intelligence with human expertise a key enabler for commercial optimization.

Higher bunker prices. Trade route disruption. Soaring freight rates.

The impact of the Middle East war on global shipping has again demonstrated how geopolitical shocks can drastically affect operational planning – and why navigating market volatility is essential to optimize the commercial efficiency of voyages, according to StormGeo.

“Operators have to expect the unexpected and be agile in their thinking,” says StormGeo’s Commercial Lead Routing Rolf Reksten.

“In an environment of fuel price fluctuations, freight market swings, operational disruption and rising emissions costs, voyage planning can no longer remain static.

“Operational decisions – from routing and speed to arrival timing – must increasingly respond to constantly changing economic conditions, in the same way that shipping must adapt to more extreme weather patterns caused by climate change,” he explains.

Accelerating cyclicality

Shipping markets have always experienced cycles, but these are becoming more frequent and volatile, driven by geopolitical effects, macroeconomic factors, energy market shifts, supply and demand, evolving regulation and critical stockpiles in key countries.

Optimization is no longer solely determined by speed and fuel efficiency, but by diverse factors that are reshaping voyage economics – and this makes operational decision-making more complex than ever.

“Rather than sailing smoothly from the Persian Gulf to India or China with crude, you may have to pick up the cargo from West Africa, Brazil or the US Gulf. Voyages are longer, the need for optimization is greater, and you have to relate execution much more to market volatility than before,” Reksten says.

The commercial outcome of a voyage is affected by the interplay of different economic variables – from fuel price volatility, rapidly moving freight markets and regulatory shifts that impact carbon costs to delays and trade disruption caused by port congestion, weather or regional conflict that can result in both direct costs and missed opportunities.

Fuel price effect

Given fuel is the largest cost variable of a voyage, bunker price hikes can significantly affect profitability without consideration of the wider commercial picture, and this requires a dynamic approach to decision-making to capture value across the voyage cycle.

Operators may lose value or increase risk if decisions are made without updated economic insight based on changing market conditions.

A case in point is the recent Strait of Hormuz crisis that fuelled higher tanker rates and a spike in bunker prices, which is estimated by lobby group Transport & Environment to have cost shipping companies an additional €340 million a day in fossil fuel bills.

Among the challenges for shipping companies are planning voyages without considering fuel price shifts, making speed decisions that do not account for port congestion or schedule changes, and having limited visibility into emissions cost exposure.

And this demands constant economic awareness with real-time data insights of the different variables to facilitate a shift from static to adaptive voyage planning to avoid leaving value on the table, according to Reksten.

‘Keeping an eye on markets’

“If you don’t have an eye on the markets and you’re purely focused on the route, this can undermine the commercial outcome of the voyage. You may need to reassess during the voyage whether to adjust speed, ETA or bunker strategy to execute in the most optimal way in relation to your commercial goals,” he says.

The need for a more dynamic approach to voyage planning is driving industry adoption of AI-driven voyage intelligence – integrating real-time data for ocean and weather conditions, vessel performance, market insights and emissions monitoring – to deliver predictive analytics supported by human expertise to inform adaptive decision-making, according to Reksten.

This enables operators to evaluate multiple scenarios and adapt according to changing conditions to safeguard voyage margins even in volatile markets, such as by capturing opportunities in a rising freight market.

“How you execute the current voyage can be tied to what your next employment will be. If the market is rising steeply, you want to sail as quickly as possible to discharge and offer your ship into the market at a higher price point,” Reksten explains.

Single source of truth

By combining operational, economic and sustainability data, voyage intelligence fully integrates commercial awareness into the planning process. Furthermore, it provides a single source of truth with visibility across company departments to allow better coordination between different teams, avoiding possible blind spots in decision-making.

“A typical voyage entails interaction between a lot of different moving parts – and this requires alignment of KPIs across commercial and operations teams that can be difficult in a fast-paced environment,” Reksten says.

Voyage intelligence allows decision-making to be informed by both operational expertise and evolving economic realities – such as metocean conditions, fuel prices, charter party requirements, freight market conditions, emissions and compliance obligations – to enable adaptive voyage management aligned with a shifting environment.

Managing uncertainty

This means shipping companies can manage uncertainty more effectively to provide better costs control in fluctuating fuel markets, freight market visibility, reduced risk of delays, improved schedule reliability, lower emissions and compliance risk – and stronger commercial margins.

“Profitability is the ultimate driver of decisions in shipping – and this is strongly impacted by market volatility. But companies able to quickly respond to changing conditions can turn volatility into competitive advantage,” Reksten concludes.