Lars Møller, CEO, Dynamic Oil Trading
The shipping industry continues to face a range of challenges, with freight rates remaining stubbornly low, assets that are struggling to recover their value and an ongoing lack of liquidity. Security threats and environmental regulations are placing more demands and costs on shipowners and operators, credit is in short supply and bunker fuel prices remain high.
To put it bluntly, despite the global economic recovery, it's still tough out there. The bunker industry sits at the heart of this challenging environment, as the fuel we supply is not only essential to keeping the shipping industry moving, it's also the most costly commodity for owners and operators.
what keeps them awake at night is not bunker market conditions in 2025, but bunker prices tomorrow
While we are consistently hearing rhetoric about the importance of investing in and changing to build a sustainable shipping industry, which is important, for most of our customers, what keeps them awake at night is not bunker market conditions in 2025, but bunker prices tomorrow, next week and next month.
Our task is two-fold then. Yes, we provide the expertise to guide their longer-term fuel procurement strategy, but we must not underestimate the importance of our role in helping them to meet their everyday needs and fuel related challenges. It is our ability to secure the right quality product at the right price and on the right terms that can prove most business-critical to our customers.
With that in mind, what does the typical work of a bunker trader actually look like and what does it take to succeed?
The Best Deal
In a depressed market where every fifty cents counts, the first goal is to always get the best deal for our clients for the best quality products; ignoring the latter can have a dramatic impact on costs and continuity. Sometimes this might mean that although you have a chance to close a deal on Monday, you recommend that a customer wait until Tuesday because they can save five dollars. Our customers appreciate that you are offering your best advice with them and trying to secure the most competitive price, not just to close the deal. For this to work though, you need to invest in strong relationships, built on trust.
the bunker market is more challenging today, because customers know that they can shop around to find a supplier who will do it for 10 cents less
It is important for us to work together with our clients in order to build a mutually beneficial relationship. Believe it or not, the bunker industry is not a money-printing machine! Shipping companies need to understand the risks that bunker companies take on when they extend lines of credit. In our experience, the best relationships are where there is a genuinely reciprocal understanding and appreciation of what both parties can offer. In this respect, it isn't just about the science of assessing creditworthiness. Particularly in a tough market, trust, accountability and the length and strength of a relationship also counts for a lot.
For example, if a customer says, "I want 500 tonnes in Singapore on a specific day, but it is impossible for me to pay earlier than 45 days," we would prefer to be asked that up front so we can then have a sensible conversation about how we can make that work practically and commercially for both parties.
The Roots of Bunkering
At Dynamic Oil Trading, we are in the fortunate position of having the financial strength, liquidity and capital to provide our customers with the best credit terms. This gives us the capacity to go this extra mile, to genuinely understand their needs and challenges, and to work together with them in order to get a deal done. We like to think of this as going back to the roots of bunkering; strong personal relationships, built on trust and a commitment to deliver whatever our customers want at the best price, of the best quality and in the right quantities.
many bunker companies are chasing business with the biggest shipping companies
It is understandable that many bunker companies are chasing business with the biggest shipping companies in the world, as these owners and operators are seen as safe havens. This has tended to increase the competition in the bunker sector to win business from what are perceived to be blue chip, low risk 'money in the bank' customers.
In this sense, the bunker market is more challenging today, because customers know that they can shop around to find a supplier who will do it for 10 cents less. However, customers' priorities have also changed dramatically. Five years ago, they would tell you that their biggest concern is their ship lying for one extra hour in Singapore, without giving too much thought to bunker prices. Today, cost control is everything. This has provided an advantage to bunker companies like ourselves who have the financial strength to secure the best prices, from suppliers and for customers, and the best terms.
The biggest question we face at the moment is determining the appropriate level of credit to provide. If a potential customer says they will pay in 30 days when we believe that they cannot pay in less than 90 days, they can expect us to ask a few more questions of them. We encourage everyone at Dynamic Oil Trading to get to know their customers' businesses and to ask questions, not just about the company but about the ship in question. For example, is it tied up against a COA (Contract of Affreightment) or is it trading spot? When was the ship built and at what price?
if that older ship has already been paid for, then the owner is in a far more robust position
For example, if a ship was built in 2008 for $120 million, compared to $45 million in 2012, that ship might cost $30,000 a day in a market where they are earning a day rate of $8,000, so they are $23,000 behind on that single ship every day. A shipowner that is happy to help us to get to know their business will ultimately give us the confidence to offer them the best price and the best terms we can.
Nor is it just about the fuel efficiency of a vessel. A newly built eco-tanker might have a daily fuel bill that is 20% lower than an older ship, but if that older ship has already been paid for, then the owner is in a far more robust position.
It's also important for us to be able to read the wider shipping market trends, which also means looking beyond the headlines. If we see a relative recovery in one sector, it is common to see investors flock to that sector, but until the fundamentals of world trade improve, along the supply and demand balance in different vessel segments, we need to remain cautious.
When I think about the attributes of a good bunker trader, counterparty knowledge is near the top of the list; the ability to put yourself in the shoes of the customer. You need to know what's going on and you need to have an open dialogue. This is why Dynamic Oil Trading places such value in employing experienced bunker traders who understand the market, customers, suppliers and other partners.
We have earned a reputation for paying our own suppliers on time and we value that reputation very highly
It's also important to practice what you preach when it comes to paying bills on time. We have earned a reputation for paying our own suppliers on time and we value that reputation very highly. What's more, the trust and goodwill that we have built up with our preferred suppliers also allows us to secure the best terms from them and they'll often also go the extra mile to help meet the needs of our customers. Of course, many bunker traders can only pay their suppliers when their customers settle their bills. This can easily lead to a situation where if they get paid on 35 days, they can only pay the supplier on 36 days even though they had 30 days credit. Happily, we have the financial backing to ensure that this issue is minimised.
The relationship between bunker traders and physical bunker suppliers does not receive much attention, but it is fundamental to the job that we perform on behalf of our customers. In any significant bunker port, there will be numerous suppliers and it can be near impossible for a shipping company to tell the good from the bad. We play a vital role in identifying high quality, reputable suppliers.
our customers want to be assured that they will get what they pay for without putting their vessel, cargo or crew at risk
Whether it is the quality or the quantity of the fuel supplied, our customers want to be assured that they will get what they pay for without putting their vessel, cargo or crew at risk. Customers are more alert to the risks than ever before and, not unreasonably, if they pay for 900 tonnes of fuel, they don't want to settle for a delivery of 860 tonnes. At Dynamic Oil Trading, we have a list of approved suppliers that we trust, not only to act honestly and professionally, but also to resolve any problems or issues that do arise. We would prefer to sleep well, knowing that we have secured a very good price from a reputable supplier, rather than the lowest possible price that is likely to result in a phone call at 3am with a problem on the delivery barge.
We care about our reputation and we care about the reputation of our customers. If they are happy, then we usually are too. The big picture is that the bunker sector is playing an essential role in supporting global shipping by supplying not only the fuel it needs, but also billions of dollars of credit. However, this is only possible through the day-to-day diligence, expertise, counterparty knowledge and strong customer and supplier relationships that are the essential tools of every good bunker trader.