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A competitive environment W

Marcus Hand overviews the issues in the bunker market today

ith bunker fuel prices averaging around $600 per tonne this year and hitting as high as $700 per tonne bunkering is the top

operational expense for shipowners. While prices are high the industry remains fiercely competitive with suppliers and bunkering ports facing a multitude of challenges. The high price of bunker fuel largely reflects

the surging prices of crude oil that have been seen this year. For the bunker supplier though high prices do not necessarily translate into bigger profits, in fact margins are often razor thin and some cases smaller companies are known to cut prices to below cost level to win business. Suppliers are not only faced with thin margins but also a higher credit risk in terms of the monetary value of the deals they are doing. Bunkering markets do not remain still either

and while Singapore, Rotterdam Fujairah and Houston are the top markets, emerging players such as China and Panama are set to at least partially reshape the global bunkering scene in the future. Another challenge for suppliers has been the

rise of slow steaming as shipowners seek to reduce cost, manage capacity and improve their environmental performance into the bargain. This has hit sales volumes as less fuel is required and the impact over the last two years can be seen at a number of bunkering ports. With the weak shipping market forecast to continue till at least 2013 the cost pressure for slow steaming will remain and many in the shipping industry believe even that when times improve the pressure on emissions will mean slow steaming is here to stay. In a market where bunker prices are so high it

is ever more important for shipowners to make sure they are getting both the quantity and quality of bunkers they are paying for. Quantity has long

been an issue, but being shortchanged a few tonnes at $600 per tonne is a major cost hit. The introduction of mass flow meters is now seriously on the agenda as owners seek to ensure they are getting what they pay for. On the quality front the push towards low

sulphur fuel in many parts of the globe in an effort to reduce emissions has brought about its own challenges. To produce enough low sulphur refiners have turned to blending, which has resulted in new issues in terms of fuel quality. This in turn has resulted in a greater push by owners and managers to test fuel to ensure there is no contamination and that the fuel also reaches the standards required. As sulphur content limits are reduced in

Europe’s emission control areas (ECAs) the percentage of fuels that are off-specification in terms of sulphur content has increased, a potentially serious issue when it comes to port state control inspections. Next August will see a growth in challenges as the North America and Canada ECAs comes into force putting further pressure on the supply of low sulphur fuel and impact bunkering ports and suppliers in Asia and the Middle East that serve the trade to the US and Canada. In the longer term environmental pressures

are very much here to stay and further regulation on emissions globally is inevitable. Shipowners will have two choices of approach to this issue, one is to attempt to reduce emissions through the use of scrubbers, the second is to switch to a different, cleaner type of fuel. At present it appears that a mixture of approaches is being taken with some owners trialing scrubbers while others look at cleaner fuels such as distillates and LNG. Many challenges lie ahead for the bunkering

market a key component in ensuring the powering of the global shipping industry.

Seatrade Bunkering Report 2011


Courtesy of ExxonMobil

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