2020 Q&A: Bunker Suppliers Look Over the Horizon

Q What do you see as the biggest challenge for bunker suppliers as we approach 2020?

A (Owen T. Webber) There’s been a lot of hype in the market about swings before and after the 2020 change over. What is interesting is the varied stances from different sources. As an independent physical supplier operating in a segmented region, we see turbulence and uncertainty in our part of the market. This requires a positive, can-do approach.

The biggest challenge may be the impact on availability of the different fuels. Other potential issues could be how bunker price increases could impact the credit worthiness of fuel purchasers. We are working hard to educate buyers about the challenges ahead in the market and the transition.

Q Do you see a shift between spot and long-term bunker supply contracts?

A We have not yet seen a trend in the mix of contract versus spot purchases, but this will very much be driven by the strategy of the buyers. Traditionally, our business has been made up of both spot and contract volumes, reliant on the expected flow of fuel oils out of major hubs. The last few months has seen turbulence created in the wholesale market, which in turn has a direct effect on the retail market. The volatility in the market makes it very difficult to forecast price and availability of the different products.

Q How can shipowners protect themselves when ordering bunkers?

A This is quite a difficult question. The needs of buyers are so diverse it is dependent on each individual position and the needs of the vessel. Vessels that tramp have a very different demand profile to those on a liner service.

But in all cases, buyers must make sure they specify correctly the product they want. They should also understand the supply and demand for that particular product in the relevant geographical area.

Circumstances are changing daily, so shipowners should keep a dialogue with their trusted avenues of support. Preparing a strategy that covers more than one eventuality will assist.

Q How will the shift in blend-stocks and changes in refinery processes impact suppliers?

A Recent developments have meant that we are seeing stockpiling which reduces storage availability. This means it now costs more money to store. Notably, we have seen a recent reduction in availability of high sulphur fuels and owners with vessels fitted with scrubbers might want to arrange contracts with suppliers.

The recent events in the Middle East have created extra turbulence in the supply chains.

Q IBIA have suggested that fuel purchasers specify bunkers to a 0.47% S limit. Is this realistic?

A This may be difficult to roll out unless you have specifically contracted at this level with your supplier. The wholesale market is selling at above this level, in general.

Q As bunker barges start cleaning out their tanks to prepare for the new products, will this affect the availability of certain products?

A Carrying multiple grades is nothing new for the market place. We have been doing this for many years and have well-proven processes for managing the different types of fuel.

Q Do you expect to see a rise in compatibility and quality issues?

A In short, yes. The market expectation has grown beyond the standard ISO specifications. Meeting these expectations will be a challenge. As a supplier, we avoid co-mingling of products, we carry out bench blend tests and can also carry out pre-checks on compatibility when samples are at hand.

By

Mark Smith
Loss Prevention Executive

Find out more
Thanks to Oilchart for sharing their thoughts: www.oilchart.com
Read more at North’s 2020 Insights area.