For many companies a Physical Fixed Price (PFP) is the best hedging tool there is. It is extremely simple to use, and you avoid all the various issues of hedge accounting and internal consolidation that you have to deal with if you use other derivatives to hedge your exposure.
 
Furthermore, a PFP still has all the flexibility of a Swap. Therefore, with a PFP you do not have to lift physical bunkers if you do not need them. You just settle the PFP as a Swap. You can also – with great ease – lift in any other port than the port that was orginally agreed. We simply use our port differential mechanism to calculate the price difference.

With a PFP, all you have to do is send us your nominations before your ships arrive at port, and we will have the bunkers ready at the agreed price. It is that simple.

Rewards

• Protection against rising markets
• No upfront premium
• No basis or time risk, 100% price certainty
• No settlement
  
  

Risk

• Opportunity cost if the market falls

Physical Fixed Price example
In December you buy a fixed price for January and February at $520/mt, 7,000mt per month.
Afterwards you do not have to think about the price, it is always $520/mt.





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