Business

Gard: Bunker quality – do bunker suppliers have charterers over a barrel?

Singapore bunker fuel contamination reveals imbalance of recourse opportunities in bunker sale contracts between time charterers and other parties.

Published

3 years ago

May 11, 2022

Admin

Norwegian maritime insurance company Gard on Tuesday (10 May) published an insight to review the imbalance between the position of time charterer vis-à-vis vessel owners versus the charterer’s recourse opportunities under the bunker sale contract, following the contaminated bunker fuel situation at Singapore:

Charterer’s obligation to provide bunkers in compliance with charterparty specification

Time charterers supplying vessels with bunker fuel oil need to ensure that they meet the contractual specifications set out in the charterparty. This may include a general obligation to provide bunkers fit for purpose and suitable for burning in the main and auxiliary engines.

The charterparty may also provide that the fuel complies with particular specifications or grades the most common of which is ISO:8217. There are various versions of this document and reference may be to a particular version or to the latest version at the time of supply. The latest dates from 2017and is due to be reviewed.

All versions of ISO:8217 at Clause 5 contain a ’catch al’ provision to the effect that the bunkers do not contain any material in a concentration that is harmful to personnel, jeopardises the safety of the ship or adversely affects the performance of the machinery.

Clause 5 is necessary because the specifications tested for would not catch material that should not be found in bunkers. For example, that is the case with chlorinated hydrocarbons recently found in HSFO bunkers supplied in Singapore. The compounds were only found by enhanced testing – GC-MS (gas chromatography – mass spectrometer).

This catch all provision means that even if the bunkers supplied by a charterer test on spec under ISO:8217 Table 1 for distillates or Table 2 for residuals, the fuel can still be rejected if it contains any material that can render the fuel unsuitable or unsafe to use.

Accordingly, owners have wide powers to reject bunkers and demand replacement. Owners can also recover damages flowing from the breach such as the costs of cleaning or even replacing the vessel’s parts/engines that may be damaged. This can be very expensive.

There will, however, commonly be arguments about whether the bunkers caused the damage or if this was caused by pre-existing issues such as the owner’s failure to maintain the engines.

If the owners choose to use the bunkers in the knowledge that it is off spec, there may be arguments that they have waived their right to make a claim (unless of course they have preserved their rights and/or obtained a suitably worded indemnity from the charterers.)

Disputes over bunker quality can be time consuming and expensive, and the best solution is often for owners and charterers to take expert advice and seek a solution together.

Buyer beware - common limitations found in bunker sale contracts

Sellers' terms often incorporate fixed (often low) limits on sellers’ liability, exclusions for certain types of loss (e.g. loss of time, profit, indirect or consequential loss), and short time bars for buyers’ claims. The contracts will also likely include choice of law and jurisdiction clauses.

The most common law and jurisdiction clause chosen in charterparties is English law and London (LMAA) arbitration. However, bunkers supply contracts often adopt the law and jurisdiction of the place where the bunkers are being supplied.

Global suppliers often select US law and jurisdiction because supply of bunkers creates a maritime lien on the vessel supplied. In many instances, the validity of the particular limitations in the contract can only be challenged within the law and jurisdiction specified.

The time limits for notification of claims may be so short that it is difficult to obtain test results and notify the bunker suppliers in time. This problem is amplified where bunkers are unsuitable due to a substance that is not part of the standard testing. In those circumstances, the contamination is usually only discovered when using the bunkers.

For example, the chlorinated organic compounds (COC)found in HFSO stemmed in Singapore in the first quarter of 2022 were only discovered when vessels began using the bunkers and experienced blackouts, loss of propulsion, high exhaust temperature deviation and excessive sludging in the fuel system. The discovery of the problem may be beyond the short time limit within the bunker sale contract to notify the seller of the claim.

Thus, while the vessel owner has a right to require the charterer to remove bunkers that are harmful, the charterer as purchaser may be beyond the time limit to make quality claims against the seller. In some cases the courts may disregard the strict time limits but this may be an uphill battle.

Establishing a claim

Despite the one-sided contract limitations, reputable bunker providers may accept responsibility for replacement of bunkers that contain contaminants that negatively affect the operation of the vessel if the charterer, or owner, has evidence from advanced testing of the contaminant.

That does not mean that the supplier will waive the contract limitations with respect to the loss of time and other consequential losses.

However, these limitations may be challengeable depending on the jurisdiction. In any event it is recommended that a buyer carefully consider bunkers terms and conditions and if possible, negotiate elements such as time limits for notifying claims and caps on liability so that they are more realistic.

This is probably only possible where buyers are able to establish a relationship with bunker suppliers as the latter often insist on contracting on their standard terms and conditions. Notwithstanding the difficulty of negotiating terms, it is wise to review terms in advance and contract with reputable suppliers that agree to replace non-conforming bunkers without a monetary cap.

Conclusion

Owners will often have provisions in their charter parties allowing for bunkers to be rejected if they contain impurities that make them unsuitable for use in the vessel’s engines, even if those impurities do not show up in the initial standard tests.

The bunkers may be usable despite being off-spec and the parties may negotiate the terms on which they are used. In those circumstances owners would be advised to obtain advice from a bunker expert and seek protection from the charterers against unforeseen damage.

From the charterers’ point of view, if the bunkers they were supplied with were off spec their recourse against the suppliers may be limited by deadlines within which claims have to be made and by a low cap on recoverable claims.

If engine problems develop when burning a new stem, and there are indications that the bunkers may be at fault, it is important for owners and charterers that the bunkers are tested as soon as possible using enhanced tests. Fortunately the Maritime and Port Authority of Singapore (MPA) was quick to investigate the source of the contaminants in HSFO and have no further reports of fuel containing high COC after 31 March.

Authors:

Kunbi Sowunmi, Senior Claims Adviser, Lawyer, New York
Marie Kelly, Vice President, Defence Claims, London
Siddharth Mahajan, Senior Loss Prevention Executive, Singapore

Photo credit and source: Gard
Published: 11 May, 2022

Business

Singapore bunker trader Sing Fuels backs fintech venture with USD 10 mil investment

129Knots will offer a vast range of OTD solutions to increase transparency and enhance risk mitigation beginning in marine energy transition sector, with plans to expand into other high growth industries.

Published

7 minutes ago

February 13, 2025

Admin

Global fintech venture 129Knots recently announced its launch with a USD 10 million investment led by Singapore’s homegrown bunker trader Sing Fuels.

The company reported that it is backed by a USD 500 million deal pipeline.

Its real-world asset origination to distribution (OTD) technology will deliver and deploy scalable liquidity solutions through secure chain technologies. This will elevate supply chains into high-value assets that meet investment-grade standards.

Moreover, the platform is driven by a proprietary data driven credit engine named Tribal Knots. Tribal Knots uses advanced machine learning and integrates both structured and unstructured data from global networks to offer real-time insights into buyer behavior, transaction patterns, and industry benchmarks.

129Knots was incubated and launched under the Singapore Economic Development Board (EDB) Corporate Venture Launchpad programme, which supports companies with venture creation and startup partnerships from Singapore.

The corporation partnered with McKinsey & Company to validate its market opportunity, which led to the creation of 129Knots to drive innovation in the real-world asset economy.

The additional support from Enterprise Singapore and IBM consulting, combined with the USD 10 million capital injection, will help scale 129Knots globally as it aims to solve the USD 2.5 trillion gap between trade finance requests and approvals, which is its first market entry value proposition.

129Knots will also offer a vast range of OTD solutions across trade credit, asset tokenization, programmable money, stablecoin-powered transactions, blockchain technology, advanced trade audit trails, innovative credit risk assessment models, and trade governance.

These technologies will increase transparency and enhance risk mitigation beginning in the marine energy transition sector, with plans to expand into other high growth industries.

Vikash Dhanuka, Founder & Group CEO of 129Knots, said: “The homogeneous approach of balance-sheet led lending is obsolete. A one-size-fits-all approach simply fails in a dynamic sector such as global trade. At 129Knots, we redefine the game with a tailored integration of OTD technology, business risk management, and finance.”

“As an example, a small marine energy supplier in an emerging market can tokenize receivables using programmable money, enabling instant credit disbursement upon achieving predefined milestones verified in real-time through advanced governance audit trails.”

“This innovation provides financiers with full visibility into trade assets, mitigates risks and unlocks capital previously unavailable through conventional channels.”

Photo credit: Kyle Sudu on Unsplash
Published: 13 February, 2025

Bunker Fuel

JLC China Bunker Fuel Market Monthly Report (January 2025)

China’s bonded bunker fuel sales rebounded in January with 1.64 million mt of bonded bunker fuel sold,
as domestic LSFO supply increased after the release of new export quotas, according to JLC data.

Published

8 minutes ago

February 13, 2025

Admin

JLC China Bunker Fuel Market Monthly Report (January 2025)

Beijing-based commodity market information provider JLC Network Technology Co. recently shared its JLC China Bunker monthly report for January 2025 with Manifold Times through an exclusive arrangement:

China’s bonded bunker fuel sales rebound in January

China’s bonded bunker fuel sales rebounded in January, as domestic low-sulfur fuel oil (LSFO) supply increased after the release of new export quotas.

The country sold roughly 1.64 million mt of bonded bunker fuel in the month, with daily sales at 52,806 mt, gaining 2.87% month on month, JLC’s data shows.

Bonded bunker fuel sales by Chimbusco, Sinopec (Zhoushan), SinoBunker and China Changjiang Bunker (Sinopec) settled at 480,000 mt, 570,000 mt, 55,000 mt and 26,000 mt in the month, while those by suppliers with regional bunkering licenses settled at 506,000 mt.

Most companies recorded higher bonded bunker fuel sales in the month, as domestic LSFO production returned to normal after China released the first batch of LSFO export quotas for 2025. Capping the upside, however, bunkering operations at Chinese ports were slowed down by the Chinese New Year holiday in late January.

China’s bonded bunker fuel exports edge down in 2024

China’s bonded bunker fuel exports edged down in 2024, as domestic refiners cut their production in view of quota tightness.

The country exported 19.63 million mt of bonded bunker fuel in the year, a modest cut of 0.24% year on year, JLC calculated, with reference to data from the General Administration of Customs of PRC (GACC).

Among the shipments, heavy bunker fuel exports settled at 18.33 million mt, accounting for 93.38%, while light bunker fuel exports settled at 1.30 million mt, accounting for 6.62%.

In December alone, China’s bonded bunker fuel exports were roughly 1.44 million mt, dropping by 20.90% month on month and 9.47% year on year, JLC calculated, with reference to the GACC data. In breakdown, heavy bunker fuel exports settled at 1.35 million mt, occupying 93.54%, while light bunker fuel exports came in at 93,000 mt, making up 6.46%.

JLC China Bunker Fuel Market Monthly Report (January 2025)

Domestic-trade bunker fuel demand shrinks in January

Domestic-trade bunker fuel demand shrank in January, as trade in the shipping market was relatively thin during the Chinese New Year holiday.

Domestic-trade heavy bunker fuel demand was estimated at 390,000 mt in the month, down by 10,000 mt or 2.50% from the previous month, JLC’s data shows. At the same time, domestic light bunker fuel demand settled at 130,000 mt, slipping by 10,000 mt or 7.14% month on month.

Bunker fuel demand witnessed a modest increase in early January, buoyed by pre-holiday restocking. However, demand declined later in the month, as the majority of downstream buyers had completed their restocking.

Bunker Fuel Supply

China’s bonded bunker fuel imports surge in 2024

China’s bonded bunker fuel imports surged in 2024, which could mainly be ascribed to tight domestic supply.

China imported a total of 6.04 million mt of bonded bunker fuel last year, soaring by 45.92% year on year, JLC calculated, with reference to data from the GACC.

Only a few bonded distributors imported LSFO in the first half of 2024, while others prioritized imported high-sulfur fuel oil (HSFO). However, in the second half, domestic LSFO supply tightened significantly amid insufficient quotas, forcing bonded distributors to import more LSFO to fill the gap. Meanwhile, demand for imported HSFO continued to improve, as more ships were equipped with scrubbers and the import arbitrage window opened.

In December alone, China’s bonded bunker fuel imports exceeded 1 million mt and hit a 4-year high, as domestic LSFO output fell off a cliff amid persistent quota tightness. The imports amounted to 1.09 million mt in the month, jumping by 19.58% month on month and 247.21% year on year.

Singapore topped all suppliers by shipping 550,700 mt of bonded bunker fuel to China in the month, which accounted for 50.32% of the latter’s total imports. Malaysia slipped to the second place with 351,200 mt, accounting for 32.09%. Iraq and South Korea ranked third and fourth with 182,500 mt and 10,000 mt, accounting for 16.68% and 0.91%, respectively.

JLC China Bunker Fuel Market Monthly Report (January 2025)

Domestic-trade bunker fuel supply tightens in January

Domestic-trade bunker fuel supply tightened in January, because of decreasing availability of blendstock.

Chinese blenders supplied about 400,000 mt of domestic-trade heavy bunker fuel in the month, a cut of 30,000 mt or 6.98% from a month earlier, JLC’s data indicates.

Supply of residual oil, shale oil and light coal tar tightened, forcing blenders to decelerate their bunker fuel production. Meanwhile, blendstock prices fluctuated higher amid tighter supply, which also dampened some blenders’ buying interest.

Domestic-trade light bunker fuel supply settled at 150,000 mt in January, down by 10,000 mt or 6.25% month on month, the data shows. Refineries continued to lower their operating rates, because of the Chinese New Year holiday and stricter industry regulations.

JLC China Bunker Fuel Market Monthly Report (January 2025)

BunkerPrices, Profits

JLC China Bunker Fuel Market Monthly Report (January 2025)

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JLC Network Technology Co., Ltd is recognised as the leading information provider in China. We specialise in providing the transparent, high-value, authoritative market intelligence and professional analysis in commodity market. Our expertise covers oil, gas, coal, chemical, plastic, rubber, fertilizer and metal industry, etc.

JLC China Bunker Fuel Market Monthly Report is published by JLC Network Technology Co., Ltd every month on China bunker market, demand, supply, margin, freight index, forecast and so on. The report provides full-scale & concise insight into China bunker oil market.

Note: China-based commodity market information provider JLC Technology has been providing Singapore bunkering publication Manifold Times China bunker volume data since 2020. Data from earlier periods are available here.

Photo credit: JLC Network Technology
Published: 13 February, 2025

Mass Flowmeter

Ceuta becomes first Mediterranean port to mandate certified MFMs for STS bunkering

Port Authority of Ceuta has implemented the mandatory use of international ISO 22192 certified and calibrated Mass Flow Meters for marine fuel supply by barge, effective February 2025.

Published

19 minutes ago

February 13, 2025

Admin

Ceuta becomes first Mediterranean port to mandate certified MFMs for STS bunkering

The Port Authority of Ceuta on Wednesday (12 February) said it has become the first Mediterranean port to mandate the use of international ISO 22192 certified and calibrated Mass Flow Meters (MFMs) for marine fuel supply by barge, effective February 2025.

It said the device ensures a much more precise marine fuel measurement, providing greater transparency and efficiency.

“The MFM allows the collection of the most accurate and extensive real-time data on the amount of product being transferred, reducing the margin of error and improving traceability in supply operations,” the port authority said in a statement.

“The implementation of this technology will minimise discrepancies and disputes between suppliers and shipowners regarding the amount of fuel received, ensuring more reliable and efficient management of bunkering operations.”

“Furthermore, waiting times will be reduced, and productivity will increase, making the Port of Ceuta more competitive and profitable for all the stakeholders.”

Ceuta becomes first Mediterranean port to mandate certified MFMs for STS bunkering

It added introducing the requirement for all deliveries to use MFMs reinforced Port of Ceuta's commitment to the modernisation and digitalisation of the bunker sector, aligning with the demands of the global market and contributing to the sustainability of maritime transport.

“This milestone represents a significant progress in our commitment to innovation, sustainability, and operational efficiency," said the Port Authority of Ceuta.

“By adopting MFM technology, we are reinforcing our position as a leading Mediterranean port and ensuring a high-quality, transparent service for all our clients.”

Photo credit: Port Authority of Ceuta
Published: 13 February, 2025

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