Cost of fuel to rise post-2020. File image/Pixabay.
Bunker trading companies will need to pay attention to their credit lines once the new sulfur limit on bunker fuel kicks in in nine months' time, a senior bunker executive has said.
Speaking on the sidelines of UAE bunker event, FUJCON, Glander International Bunkering CEO Carsten Ladekjaer said companies need to ensure they have the financing in place to meet a surge in demand for liquidity.
On the credit side of things, there will undoubtedly be more risk.
"Unless they have opted for scrubbers, each client will need a larger credit facility to buy today's equivalent of new compliant products," Ladekjaer was quoted as saying by price reporting agency S&P Global Platts.
Some clients may be hit hard by the increased costs related to IMO 2020 and some may not survive, the executive added.
While operators with ships equipped with scrubbing equipment should be able to keep fuels costs down, those opting for distillates will be paying significantly more for bunkers, certainly over the short term.
Market fundamentals suggests a rise in demand for distillates and fall in demand for high sulfur fuel oil with price levels adjusting accordingly.
However, a high degree of uncertainty remains as to how volatile the market will become as the shipping and bunker industries move towards the January 1, 2020 enforcement date for the new rule.
Most commentators expect volatility in the market to be most acute in the first half of next year.