0.5% Sulfur Cap: Good News for Bunker Traders, Bad News for Shipowners

Staal says Brightoil currently does not to deal with traders or trading houses in general.

The introduction of a 0.50 percent global sulfur cap for marine fuel could be good news for traders, particularly if it comes into force in 2020, Hans Staal, Global Bunker Director at Brightoil Petroleum (Holdings) Limited (Brightoil) has told Ship & Bunker.

"A more complex supply picture concerning availability of alternative fuels or new fuel grades worldwide, will likely benefit international bunker trading companies, as their global reach enables a more complete market understanding," Staal tells Ship & Bunker.

At the same time, for ship owners, the cap means the prospect of having to buy compliant, and so more expensive bunker fuel at a time many sectors are witnessing prolonged market difficulties.

"With 2020 only three years away, we may still have a financially distressed shipping sector and a global 0.50 percent sulfur cap will significantly increase fuel costs, assuming oil prices remain stable," says Staal.

An increased bunker cost will have natural implications on credit, and in that regard Staal expects the new cap to mean more business for traders.

"You may find a situation in which suppliers continuously reduced credit exposure towards certain ship owners and segments leaves a gap to be filled when increased bunker prices add additional pressure to already limited credit lines. The question is: Who will fill this gap?"

The answer, of course, are the traders, and Staal's view echoes that of Norden's Andres Borella, who earlier this month told delegates gathered for SIBCON that while bypassing traders is possible, it is not practical.

"So I think from a credit perspective, the bunker trading houses, combined with much needed consolidation in the bunker trading industry, are in for a major comeback in the years to come," says Staal.

As for Brightoil's position, Staal says that in 2014, even before the OW Bunker collapse, the company made a decision not to deal with traders or trading houses in general.

"Going forward, we may reconsider this decision, as we increase our market share in Singapore and China," Staal says.

IMO is expected to make a decision next week on whether the global sulfur cap will come into force in 2020 or 2025.