Post-2020 Bunker Market Will be Driven By Quality, Not Credit

Quality will be king post-2020. File Image / Pixabay

Bunker quality will replace credit as the key driver in the post-2020 bunker market, so believes Euronav CEO, Paddy Rodgers.

The change will come as the vast majority of the world fleet switch away from burning residual fuel in order to comply with the upcoming IMO2020 global 0.50% sulfur cap.

"The bunkering market was a residual fuel oil market, abandoned by the oil majors and refiners and handed it over to bunker suppliers. And so there's going to hanky-panky around the quality of volumes and pricing of bunker fuel, which we saw last year with a number of contamination cases and would be huge spreads that you can see globally geographically, depending on where you buy and on what time," Rodgers said Thursday during the firm's Q4 earnings call, in reference to last summer's widely reported "bad bunker" issues.

"I think this market, where people position themselves not on the quality of the product but on the credit terms that can get to shipowners is going to get time called on it in IMO 2020."

But with the new sulfur cap coming into force on January 1, 2020, and vessels widely expected to make the transition to new fuels several months before that, quality is seen as king.

"People have to understand the whole world of bunkering is changing. If people are going to be buying a product now, which is desulfurized product, they're going to need a quality assurance and they're going to need provenance of origin," he says.

"Shipowners are going to have to warrant to their customer that they have fuel supply on provenance that is a reliable, timely and meets the need to keep the fleet reliable and of good quality service."

* Earnings call transcript by Seeking Alpha