IP Week: What we Learned About IMO2020 Bunker Fuels and the Shifting Mood Towards Collaboration

Paul Hardy, NSI

What a great IP week that was. You could feel the increased energy up and down the hotels and meeting rooms of Park Lane. The challenge of 2020 seems to have galvanised the market to collaborate and look for solutions. I personally found people I had not spoken to for years looking to work together again in a new spirit of cooperation.

As brokers I believe we can fill the role as important aggregators of information and we can form the bridge between suppliers, large trading houses and buyers. I personally held over 30 meetings with suppliers during the week as well as numerous others with Ship owners. There is a pattern emerging of various plans and they are based on differing logistical structures and size of markets. As of yet not on product availability.

In terms of credit there are numerous challenges identified. Firstly, the need for more and secondly whether insurance companies will increase their cover to match changing market dynamics. The larger companies with more experienced credit managers should be able to assess risk more efficiently and give themselves a competitive advantage.

We have seen during IP week a number of negative reports about the large trading houses. For many years these companies have been the source of a lot of liquidity within the market. As brokers we are happy to collaborate with all the large trading houses where they can add value. This could be through increased liquidity, contract structuring etc. To paraphrase one large entities recent statement, it is the arbitrage in knowledge of price, location, credit and information where the trader can create value.

I was very interested also to hear of the likely 0.5% product compositions and it is clear there will be an East/West divide. The West focussing on a fuel oil based solution and the East a distillate based solution. Of course with the differing economies a new West/East arb may open but, a number of industry players with blending knowledge suggested the shelf life of new compliant products may be c. 3 months. There is thus a potential risk for some 'arb'products to 'fall apart'.

It is very clear that there will be no guarantees of compatibility between regions, between suppliers and even within a particular supplier delivering products at different locations. It is key then for the owner to plan in advance how the products will be handled on ship to avoid co-mingling and associated problems. I believe in the run up to 2020 the brokers job will become much more technical and the knowledge of specs and handling of product will come to the forefront. There are highly experienced people in our market with specialist knowledge and their value will surely increase.
What I expect over the coming months is further discussion between all sectors of the market. The closer we can all work together the more prepared we will be for the switch. I have mentioned in previous articles I see opportunities for collaboration between owners and pooling of volumes. I would also now like to extend a hand to any of our supply and trading partners to discuss openly how we can more closely work together.

In summary, we arrive back to our offices following the best IP week of many a year and everyone returns with a sore head, sore feet, a case full of business cards and renewed optimism for the future.