More Bunker Companies Undergo Consolidation Efforts as the Industry Prepares for a Tough 2017

Continued consolidation within the container shipping markets is expected to weigh on the bunker market in 2017.

World Fuel Services Corporation (WFS) [NYSE:INT] is the latest player reported to be undergoing consolidation efforts across its global bunker operations as the industry prepares for what it expects to be a tough 2017.

While WFS has told Ship & Bunker it currently has no comment on the developments, a number of sources familiar with the matter have told Ship & Bunker that several members of staff from its offices in Singapore, London, and Rotterdam have parted ways with the bunker company.

Local market sources in Australia, meanwhile, have told Ship & Bunker that WFS' office in Perth has closed completely, with inquiries for Australia and New Zealand now being handled by their Singapore office.

Other players have been more vocal about the need to restructure their operations, perhaps the most notable of which is Bomin, who says the bunker industry has entered a "new era."

Last month it announced the closures of its trading offices in Athens and London, and more recently said it was closing its offices in Rio de Janeiro, Tallinn, and Madrid, as well as its physical supply operations in Estonia and Spain.

Sources have told Ship & Bunker that Bomin has also trimmed staff in Houston, but the company has not confirmed this.

For the record, Bomin says it will also invest where it sees potential, a point highlighted during the recent expansion of its physical supply operations in Singapore.

A Tough 2017

Adrian Tolson, Senior Partner at 20|20 Marine Energy, has already warned that difficult trading conditions for the shipping industry, and in particular the continued consolidation within the container shipping markets, means a likely contraction in bunker volumes next year.

"2016 hasn't been fun, and I think 2017 could be worse," a source at an APAC-based supplier told Ship & Bunker.

In the US, local players see Donald Trump's recent Presidential election victory as further evidence bunker demand will weaken in 2017.

The president-elect is widely expected to reverse President Obama's decision to reject the Keystone XL pipeline, which in theory would mean decreased dependency on oil from outside of the continent and an associated reduction in tanker traffic.

Trump has also vowed to bring manufacturing back to the US, which if successful would presumably mean a decrease in imports of foreign goods and an associated reduction in vessel traffic.

Of course no-one wants to see their friends throughout the industry losing their job, particular at this time of year and only two years after mass layoffs in the wake of the 2014 collapse of OW Bunker, but there is a silver lining to this cloud.

Based on the views of several industry sources Ship & Bunker has spoken to, this trimming should not be seen as a sign that the "next OW" is coming, but rather it is being quietly seen as a huge positive for those taking the tough decision to do it.

"When things are going well, you can gloss over unprofitable offices, but the truth is a lot of people have been hired to deal with a volume that's no longer there," the CEO of a well known bunker company told Ship & Bunker.

"If I didn't see them cutting staff I'd say something is going wrong."

Separate sources have commented to Ship & Bunker that today, many traders need margins of $3 or $4 per tonne to maintain their current structure.

"The problem is some are doing business at only $1/mt," a European supplier told Ship & Bunker.

For those finding themselves in such a position, the impetus to trim is therefore clear.

"These are smart decisions, and it makes you wonder about those who recently decided to expand," one industry veteran commented to Ship & Bunker.

"The suppliers and traders who are acting now are making the right moves, and delaying this will only make it more difficult."

News of further cuts seems almost inevitable then, but the industry can take some heart in the fact that this year it's the Trim Reaper, not the Grim Reaper, wielding the axe.