Few Ports With VLSFO Availability Problems: Minerva Bunkering CEO

Bunker purchasers seeking VLSFO have largely not been leaving empty-handed so far this year. File Image / Pixabay

Minerva Bunkering now sees 'very few' ports where the availability of low sulfur fuel oil is a problem, according to its CEO.

"On the challenges with availability of fuel ... I think the industry has adequately responded," Tyler Baron, CEO of Minerva Bunkering, said in a recent interview with Ship & Bunker.

"There are very few locations in the world where availability of low-sulfur fuel has presented any kind of a challenge.

"In terms of fuel quality, I think the transition has largely played out as we anticipated, leading to a greater focus on the primacy of the supply chain to ensure quality and visibility into fuel provenance; and the importance of controlling physical logistics such that quality is maintained from refinery gate through the customer flange."

Credit Availability

While the problem anticipated before IMO 2020 of a lack of availability of trade credit has been 'completely overcome' by the collapse in the oil price, Baron said other problems with credit have since arisen.

"The corollary to that is that we continue to see increasing pressure on the financing side for bunker suppliers," he said. 

"Given the challenges that the industry has had over the past several years, the number of insolvencies and frauds that have led to losses for lending institutions, this ongoing trend of reduced extension of credit to bunker suppliers, has only accelerated with the recent stress in credit markets in general and what's happened with Hin Leong."

Hin Leong's reported troubles with its lenders have caused its subsidiary Ocean Bunkering, one of Singapore's largest marine fuel suppliers, to halt its activities.

Minerva's own position has been protected from the oil drop by its hedging programme, Baron said.

"We hedge all our molecules; we do not speculate or take flat-price risk," he said.

IMO 2020 Asset Advantage

In advance of IMO 2020 it was assumed that having a large quantity of bunkering assets, as Minerva does, would be a strong advantage going into the start of the year. But now the picture is more complex, Baron said.

Asked if it was still an advantage, he said: "The short answer is yes, but for different reasons in what is a dynamic market.

"Obviously the transition to IMO 2020 tightened the demand for infrastructure, as you introduced a new grade with compatibility considerations.

"That is a positive if you are an owner of  assets.

"Conversely, fixed assets bring with them operating leverage; so when markets shrink, if you have a fixed asset base you need to turn those assets.

"What it does for us in any environment is create optionality, flexibility, and a degree of control that we try to use to the benefit of our customers and by extension ourselves.

"For example freight rates are very high for clean and dirty products at the moment, so having a large fleet of barges creates interesting opportunities to shuttle cargo throughout our network to create savings.

"Similarly, having storage capacity can open up opportunities in an extreme contango environment.

"We're believers in the physical supply model, and while it can represent opportunities and challenges, it always affords flexibility and control that we try to use to offer our customers better service and prices."