While the IMO 2020 transition appears to have been relatively smooth, as invoices fall due for the more expensive IMO 2020-compliant bunker fuels lifted at the start of the year ‘then we will see whether there is the amount of credit available in the market that we think,’ cautions LQM Petroleum's sales manager, Neil Lamerton.
His observations on potential credit pressures came during his presentation at the Middle East Bunkering Convention in Dubai at the beginning of February. He told delegates that some northwest European suppliers have brought their credit terms down from 30 to 21 days, while suppliers in other locations have been offering cheaper bunker prices for cash on delivery payments.
‘There are also ways for a broker or trader to make some money by paying early and still offering a good service to the shipowner,’ he said.
To illustrate the impact that IMO 2020 has had on a fuel buyer’s spend, he offered the example of a Panamax operator. With a bunker purchase of 800 metric tonnes (mt) priced at $312 per metric tonne, this would fuel the ship for some 27 days. However, with bunkers priced at $750 per metric tonne, the same spend would only secure 330 mt and the vessel could sail for just 11 days.
Lamerton also noted that: ‘Something that has concerned us slightly in the last month is that we have been approached by quite a few of the smaller traders looking for credit, and I think that could be something that we see going forward.’
Given recent bunker price volatility, he emphasised the importance of good voyage planning.
‘A good bunker broker/trader can help buyers work out the best place for their vessels to bunker, but this does rely on operators giving the broker/trader more information than they usually might,’ he said.
In the past, the main bunker hubs could be relied upon to offer the cheapest fuel, but this may not necessarily be the case going forward and owners and operators really need to do their homework on the best places to bunker. In the IMO 2020 transition phase, gasoil has on occasion been cheaper than very low sulphur fuel oil (VLSFO), notably at Singapore, while Chinese ports have had a more competitive VLSFO offering.
Lamerton also pointed to Hong Kong’s bounce back as a good bunkers-only location ‘with prices and availability being cheaper and better than surrounding ports’.
Conversely, Colombo, a well-established bunkers-only port, has seen tight fuel avails and prices reaching $800-$900 p/mt.
Lamerton also said that owners are increasingly requesting a Certificate of Quality (CoQ) with their quotations but, he told delegates, the timing of these requests is important. As barge and product availability has been so tight in the IMO transitional phase, if a CoQ is requested some two to three weeks before the product is lifted then it may bear no resemblance to the fuel that is actually stemmed.
In terms of the market for HSFO 380 cSt, Lamerton noted that most of this product is being purchased on contract or through direct transactions between the large sellers and buyers.
There have not been very many enquiries for spot purchases of 380 cSt, he said, and when there are such enquiries there can be a problem with barge availability as these vessels are being deployed to fulfil contract deliveries.
He also considered the issue of the digitalisation of the bunker industry, noting that a number of trading platforms have come and gone in recent years. While some large buyers, such as Maersk and Integr8, have developed their own systems, they are not for wider, external use.
‘The business is ripe for some sort of digitalisation, but it has not been successful so far,’ he commented. ‘Will 2020 help with this? – I’m not so sure; but it is something that I think will happen in the future.’
In the December 2019/January 2020 issue of Bunkerspot magazine, LQM Petroleum Services CEO Daniel Rose and LQM USA MD Jordan Felber explained to Lesley Bankes-Hughes how LQM, as a hybrid broker, has worked to facilitate the IMO 2020 transition.