Bomin: Bunker Traders Still Play a Key Role in Risk Management

Thursday October 20, 2016

The 2014 collapse of OW Bunker highlights the potential pitfalls of dealing with an intermediary, and some buyers say they have begun purchasing from suppliers directly as a result; that said, bunker traders still play an important role in the risk management picture, Captain Joe Zhou, Hong Kong-based Regional Credit Manager for Bomin has told Ship & bunker.

This is even the case in the U.S. where a string of court decisions this year have ruled that physical suppliers who deal with an intermediary such as a bunker trader, rather than directly with the buyer, are not entitled to a maritime lien and therefore have no way of recovering unpaid bunker bills should the trader go bankrupt.

The Res Cogitans case in the UK, meanwhile, has shown that in such a situation buyers under English law may be exposed to paying twice, or even three times.

"Of course the U.S. situation makes our job even tougher as we have less security, but it comes down to knowing the people you are dealing with," said Zhou.

"We could sell to end users directly, or a trader if we trust them."

Zhou explains that, considering a simple case of a shipowner looking to buy from a supplier, either party may be viewed as either high or low risk.

"If a low-risk shipowner is dealing with a low-risk supplier, then the two parties may wish to deal with each other directly. However if a low-risk shipowner is dealing with a high-risk supplier, then the owner may not want to buy from the supplier directly, and instead use a strong trader when there is no better choice," he said.

"Now considering a high-risk shipowner dealing with a low-risk supplier, although the owner may wish to buy directly, the supplier may not give him credit, hence a trader may be needed. And of course when a high-risk shipowner is dealing with a high-risk supplier, they may both wish to avoid dealing with each other directly, so again a trader willing to take risks may be needed."

One thing Zhou stressed was that in terms of "high" and "low" risk, this is not necessarily the same as "big" or "small" companies, as in the current market bigger may not be safer, and vice versa.

"For example, an owner with a large fleet of bulk carriers with huge debt burdens could go under at any time with the long-lasting poor market conditions," he said.

"On the other hand, a smaller owner with only a few ships free of mortgages could present a much lower risk now."