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Key issues post IMO 2020: Cost of decarbonisation, increasing governance and securing credit

16 Apr 2021

Panellists representing interests from the bunker trading and purchasing sectors shared their experience during the pandemic and presented an outlook during the International Bunker Industry Association (IBIA) ‘Bunkering & Shipping in Transition’ conference on Monday (12 April).

Session Two: Coping with Covid covered many aspects of the pandemic impacting the bunkering industry, and provided a particular focus on credit in relation to rising bunker prices on the back of recovering markets post 2020.

“It’s pretty clear liquidity of cash and working capital are strategic and structural issues going forward, not just for our [bunkering] industry but for the shipping industry alike. And it is predominantly related to companies providing sustainable proof of adapting to decarbonisation,” said Cem Saral, CEO of Cockett Group.

“Decarbonisation efforts will have an impact on how banks view businesses that support shipping business including our business. And if you compound that with the issue of significantly increased governance needed for the bunkering industry […] these are two pressing concerns before unit prices become an issue.

“Maintaining a sustainable working capital and relationship with financial institutions are a challenge for the second half of this year. It is strategic change and transformation that I think some of us are better suited than others in adapting.”

Svend Stenberg Mølholt, Group COO at Monjasa, commented on the management of increasing credit lines with VLSFO prices being approximately 50% higher than where HSFO was.

“I think we can agree that we are surely seeing a further request on the credit side when it comes from rising oil prices. As a trader and also physical provider, this also means some of these operations are back to back on credit lines,” notes Mølholt.

“So we are getting further credit from suppliers and we are extending the same on levels to customers. But, of course, if prices continue going up, there’s going to be a further push for credit in the industry.

“As of now, we don’t see the oil prices high enough to pose a real challenge. I think one theme that we discussed earlier, which is the drive from the financing partners on transparency, shows there is greater understanding [needed] of our business. When you’re able to do that, the funding picture, I think, looks reasonable in light of current oil prices.”

Published: 16 April, 2021

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