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KPI OceanConnect: Transparent partnerships will guide shipping towards 2030 and 2050

28 May 2021

As the maritime industry turns its attention to 2030 and 2050, the lessons learnt from 2020 have created a new dynamic that requires a consultative approach to bunkering. Jesper Sørensen, who we reported becoming Managing Director of KPI OceanConnect Singapore in August 2019, tells Manifold Times about the value of having a transparent bunkering partner for your marine fuel procurement strategies.

At the beginning of 2020, major concerns over quality, availability, compliance and compatibility were frequently in the maritime headlines as we counted down to the introduction of the IMO’s global sulphur cap. But once coronavirus struck, unforeseen risks emerged across the supply chain and created even greater operational complexity for shipowners and operators.

The dual impact of Covid-19 and IMO 2020 has permanently changed the global marine fuels market, but it’s affected individual bunkering regions in different ways. For example, in Singapore total volumes were up year-on-year, whereas Fujairah saw a decline, likely due at least in part to a reduction in the number of tankers arriving to load crude cargoes.

In hindsight, perhaps the biggest change was the withdrawal of many commodity-focused banks from the market. This was mainly due to the losses they sustained in recent years from the financial malpractice of certain infamous marine fuels players, as well as a perceived need to reduce their exposure to cyclical markets that are facing increased regulation and greater capital requirements. The reality is that most players in our industry have experienced a decline in capital availability. For all but the biggest players, the departure of well-known names ABN AMRO and BNP Paribas has been a serious shock to the system.

Alongside this challenge of credit and creditworthiness came the stress of some industry balance sheets after years of volatile freight rates, and the higher cost of IMO 2020 compliant fuels made it more difficult for smaller firms to keep doing the same level of business with their existing credit lines. As the industry has endured Covid-19, risks across the supply chain have increased and we saw several businesses that did not have adequate risk management cease trading.

Today, with vaccinations rolling out worldwide, many industries returning fully to work, and crude demand returning towards pre-pandemic levels, there is much to be cautiously optimistic about. However, some of the risks we at KPI OceanConnect highlighted back in 2019 may still emerge in future. However, for those partnering with a reputable, transparent marine fuels provider who has successfully navigated the compliance challenges of IMO 2020 and are in a strong position to lead owners and operators through the next transition, there will be much greater operational certainty.

Approaching 2030 and 2050

If the past year has taught us anything it’s that fuel buyers, shipowners and operators need trusted, expert marine fuel counterparties. IMO 2020 changed the way that ships manage differing fuel products, and created an inherently more complex procurement landscape, but there are exciting years ahead of us in terms of exploring different propulsion pathways and developing our marine fuels mix.

It’s clear that compliance, compatibility, and safety have become more interlinked than ever before. Sourcing the right fuel, at the right time, and for the right vessel has become substantially more challenging – especially outside the major hubs, and it takes an innovative partner with global reach to do this efficiently and effectively.

Oil price volatility and bunker prices are likely to continue on their upwards trend for the coming months, but we expect that they will stabilise once economies are in a stronger position. April 2020 saw the true impact of Covid-19 with the lowest rate of VLSFO at $206.50 MT in Singapore. By March 2021, VLSFO averages became closer to $500 MT here in Singapore and remain in that region. Price fluctuation as we’ve experienced in the past 14 months is also an important reminder about working with trustworthy partners who have the technical expertise to deal with issues and claims. When speaking to clients, I’m hearing more and more in recent months about issues that can be equally important as price: who they partner with, their financial stability, whether they have credit insurance, and how they settle disputes.

There will be major challenges in the years to come for the bunkering industry, but counterparty risks shouldn’t be one of them. As the industry faces mounting pressure on credit, time invested in fully assessing what would and wouldn’t work for your business model is crucial. We expect to see more consolidation in the industry as the transition towards future fuels and alternative sources grows. Delivering in this transitional period requires expert local and technical knowledge, financial strength, and global coverage as part of this new norm for the marine fuels ecosystem.

The industry will naturally call for more transparency, so having partnership-based relationships built on trust will unlock greater opportunities for all stakeholders. Modern bunker traders need to act as transparently and collaboratively with customers and stakeholders to implement marine energy strategies that meet a shipowner’s needs today and tomorrow. KPI OceanConnect is well positioned for the current changes and challenges in the marine fuels supply chain by providing solutions in response to the increasingly diverse and complex nature of the market and to meet the more rigorous needs of our business partners.

 

Photo credit: KPI OceanConnect
Published: 28 May, 2021

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