“Trends and Opportunities in
today’s Marine Fuel market and
what does it mean for those
buying bunkers”
Adrian Tolson
UK Chamber of Shipping – Fuelling
Operations Conference
February 9th , 2016
1
Introduction
• State of the Industry; is it the worst
it’s ever been?
• Perfect storm of events commencing mid-2014
• Opportunity
• Regulatory brick wall in 2020
2
Lower Prices
Lower Prices and Industry Impact: Be careful what you wish for!
• Uncertainty: no one is making decisions in this market
• Marginality: poor returns as more suppliers and traders compete, driving margins down
• Viability:
returns on investment challenged – impacts refinery investment (upgrading) and
physical supplier investment
• Liquidity:
• Credit:
easy entry to market
easier at lower prices to give credit, easier to receive credit…owners less dependent on
traders?
• Complacency: Prices low, who cares…tanker operators?
• Affordability: Hedges cheaper
3
Channel Rationalization
Channel Rationalization; Lower counter party risk – It’s all about Risk! Shortening the supply chain!
•
•
•
•
•
OW Bunker Collapse and impact on sales channels
Physical suppliers want to get closer to buyers to have greater control over transaction chain.
Suppliers need to adapt their approach to sales, making a difficult transition away from purely
transactional relationship to one of partnership/providing counsel to owners and operators on
purchasing strategy
Buyers need to get closer to suppliers and can afford to?
Dating site required!: Technology Intercedes – Clearlynx
4
Channel Rationalization cont.
•
Brokers Intercede
•
Traders volume suffers
•
Traders fighting for a smaller part of the pie
•
Margins Suffer
•
Can ‘strong’ traders can grow and prosper?
5
Credit
Credit – So why should anyone sell to you?
• Credit across industry sectors
• Counter pressure to desire to shorten supply chain
• You may not like who you buy from, but you have to buy! Traders still needed
• Balance has shifted in buyers favor or has it?
• Transparency rules – make it easy to get credit
6
2020
2020 – Deadline looming
• Global 0.5% ECA in 2020? Looking likely; this is on top of the 2020 EU ECA, and 2019 China ECA
• Is there enough supply – No! One estimate 70-80mmts shortfall that needs to be supplied by
residual fuel
• What will happen?
• Residual Fuel – Utilities versus Bunkers….who will get the cheap prices?
7
Opportunities for owners and operators:
Set up clear purchasing strategies
• Re-engineer purchasing channels
• Look at risk on all levels – counter party risk analysis
• Explore technology – Dating site!
• Build relationship with fuel supplier/ensure that they understand your business strategy
• Industry may move towards outsourcing options
8
Don’t forget the Prices!
Don’t take your eye of the $’s!
• Not a time for complacency
• Where will prices go?
• Oil is historically low (but the conventional wisdom suggests crude oil prices will rise by 2020;
$60 per barrel? But what does this mean for the price of distillates?
• Adopt clear hedging strategy
9
Traders
Don’t ignore traders
• Traders exist to bank the industry, and provide liquidity - all effective purchasing strategies
include traders at some point. But will the standalone traders survive? Or just joint
physical/trading operations?
• Buyers may not think they need them right now…but they will….stay friendly!
• Recognize you need credit and they may be your only choice
10
Physical Suppliers
Support physical suppliers
• They need a friend!
• Recognize every 50 cents comes from their pockets – if you feel the need to complain about
quality or service
• In the last 10 years it’s been a general rule in the bunker supply business that physical supply is
less profitable than trading
• Consider the risks that physical suppliers take
• Make it easy for them to give you credit – transparency cuts both ways
• Don’t ask the impossible in T&C’s – don’t force yourself into the hands of traders over principle
11
2020 Decisions
2020 Decisions
• Scrubbers?
• LNG infrastructure developing, but will not be sufficient by 2020
• 0.5%
• Route Dependent
• Develop compliance strategy on a vessel-by-vessel basis
12
Conclusions
• The industry has never faced the myriad of challenges and complexities that it does today
• Perfect storm of low freight rates, tough economy, low oil prices and significant regulatory change
• Despite this; there are real opportunities for all within the marine energy supply chain
• But it takes a fundamental understanding of what those changes are; how they impact your
organisation, and what you must do to adapt and change
• And significant change is required…it’s not good enough to do nothing. The time for action in now!
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