Why Neptune Orient Lines is failing to cash in on massive oil price crash

Don’t expect any savings for NOL.

Investors might expect Neptune Orient Lines to rake in tremendous savings from the ongoing oil price crash, but the shipping line is unfortunately unable to cash in on the unprecedented plunge.

According to OCBC, bunker expenses historically make up around a quarter of NOL’s cost base, but the firm will be unable to take advantage of lower costs because of certain parameters in its sales contract.

“Note that NOL’s sales contract includes bunker adjustment factor which is an adjustment to shipping companies' freight rates to take into account fluctuations in the cost of fuel oil (bunkers) for their ships. As such, we believe NOL will not enjoy much savings on lower bunker prices, being neutral to oil price fluctuations,” stated OCBC.