Asia/Pacific News
Neo: Singapore Bunker Players Shouldn't Believe Those Predicting Market Disruption from MFMs
Singapore bunker players should not believe those predicting there will be significant disruption to the market next year as a result of the January 1, 2017 introduction of the mandatory use of mass flow meter (MFM) technology for HFO bunkering, Simon Neo, Regional Manager Asia for the International Bunker Industry Association (IBIA), has told Ship & Bunker.
"I think we might see a small drop in volumes," he said, "but overall very little disruption."
That drop in volume will come from the fact that some buyers are used to players underquoting in Singapore, who then make up the difference through short deliveries or other means - a situation that should be prevented by the introduction of MFMs, meaning some buyers may look elsewhere to load their bunkers.
But with Singapore having last year beaten its previous annual bunker sales record by some 2 million metric tonnes (mt), and the year-to-date volumes for 2016 already 11 percent higher than in 2015, this small drop would presumably have very little material effect on the world's biggest bunker market.
With a little over seven months to go, already one third (76 of the 226 total) of registered bunker vessels in Singapore are equipped with a Maritime and Port Authority of Singapore (MPA) approved MFM system.
Even through this progress appears promising, some have speculated that a significant number of vessels will not be upgraded to meet the new standards, leading to a sudden drop in the number of available bunker barges on January 1, 2017, and subsequent delivery problems.
Neo, however, says this should not be a worry.
"I don't think we will see any tightness in the market because of this next year," he said.
"Yes it is true that not all owners are going to upgrade their vessels, but it is important to realise that of the 226 registered tankers around 50 of those are for MGO only. Others will convert from being HFO to MGO to avoid the cost of upgrading, but others I know are planning to replace their vessels with new tonnage.
"I think by 1st Jan 2017 we will have around 120 to 130 MPA approved MFM barges, so with 76 already in service, we are actually a lot closer to finishing the fleet-wide upgrades than some people realise."
Another theory that has been postulated is that those Singapore players unwilling to pay for MFMs will avoid the new rules by bunkering outside of the port limits, perhaps even taking their bunkering operations to Malaysia.
But this idea was also dismissed by Neo.
"I don't think so. Where are they going to go? Johor? There the anchorages are already very busy," he told Ship & Bunker.
"And outside Singapore port limits there is a risk of being arrested by other port authorities."
Instead, Neo suggests that for the few buyers, and sellers who do take their business away from Singapore, it will be Sri Lanka and Ports on the West Coast of India who could benefit.
"I think in the future if people look outside of Singapore for their bunkers, it will be there, not Malaysia, where new opportunities may emerge."
Stories of potential market disruption from MFMs is nothing new, and various theories have been circulating since MPA announced the move in 2014.
One such early worry was that the cost of MFMs would be so great that a "two tier" pricing market would emerge in the run up to 2017, with those having to pay for MFMs forced to charge a premium to cover the cost of installing the technology.
Neo dismissed this idea - correctly as it now transpires - telling Ship & Bunker back in 2014 that Singapore's suppliers would be able to recover the cost of installing MFMs in around six months from simply adding just a $1 per metric tonne (pmt) premium to bunker prices.
