Americas News
Panama Bunker Prices Under Pressure From Illegal Players, Too Much Competition, Low Demand
Lower than usual demand, a glut of product, and too many players - some of which are undercutting competitors with illegal bunkering practices - are putting bunker prices in Panama under pressure, local sources have told Ship & Bunker.
Bunker price data from Ship & Bunker shows on May 14, 2015, IFO380 in Panama hit a 2015 high of $373 per metric tonne (pmt), and on Wednesday, just over three months later, it had slid $127 to a 2015 low of $246 pmt.
"Throughout July and August there's seasonally lower demand in Panama, but this year it's lower than what we typically see," one established local player told Ship & Bunker.
"There's also a lot of product in storage right now."
Accusations of illegal bunkering practices - specifically, players operating without the required permits - are not a new development in the Panama market, and Ship & Bunker has been tracking such accusations for over a year.
"The issue is that to be a licensed supplier you need to have storage. That costs money which is built into the bunker price," a source familiar with the Panama market explained to Ship & Bunker.
"If you don't have storage, you can undercut the competition for the same margin. It's as simple as that."
So far, the Panamanian authorities do not appear to have not taken any action as a result of the allegations, a factor that one of the companies implicated in the alleged malpractice since early 2014 says is an indicator that nothing untoward is taking place.
"If we were doing something wrong then it would be expected that the authorities would take appropriate action. But they have taken no action, so I really do not think we have a case to answer," they told Ship & Bunker.
A Growing Problem?
Ship & Bunker has been told that earlier this year a second supplier has started operating in Panama without a licence using a bunker tanker that had previously been out of service for some time.
"They're not doing much volume, maybe a few thousand tonnes, but it destroys the margins on the tens or hundreds of thousands of tonnes everyone else is selling," a local source told Ship & Bunker.
"A few months back they were undercutting by about $15, maybe $20 [per metric tonne] but it's calmed down a bit now."
Ship & Bunker has contacted the Panama Maritime Authority (AMP) regarding the allegations, and while it has yet to comment on them directly, in an emailed response noted that "the director of ports was interested in helping provide solutions to this problem."
Potentially adding to the problem of distorted prices is the suggestion by one recent media report that subsidised Venezuelan oil has been entering the market.
However the source Ship & Bunker spoke to indicated this was unlikely to be the case.
"It is highly unlikely Venezuelan barrels are coming to Panama due to the specs, it's very difficult to blend. Most goes to China."
Earlier this month Ship & Bunker reported that the AMP said May bunker sales across the region's two costs totalled 2,234,162.32 barrels - about 310,000 metric tonnes (mt) - which was the highest sales volume since December 2014.
