WFS: Intermediaries Have Much to Offer the Bunker Market

Trusted intermediaries can minimise risk (file image/pixabay)

Pressure on bunker traders is increasing as a preference for direct relationships between buyers and suppliers circumvents the need for an intermediary.

But, according to bunker intermediary World Fuel Services (WFS) writing in the shipping publication Lloyd's List, bunker traders retain a vital role in the marine fuel supply chain.

"Ship owners and bunker traders can enjoy very successful direct relationships - in the right circumstances," WFS said.

"Where a ship owner operates a limited number of services in a regional or local market, they can chose to deal with a global trader with local physical assets, who, given their global scale, can offer a long-standing credit line."

Furthermore, WFS points out that "the more engaged traders offer direct physical supply in key ports".

And that can be useful to buyers as they can leverage the trader's physical assets or, if more appropriate, tap into the trader's "supply network and local knowledge of vetted/approved suppliers in more obscure ports".

Bunker buyers will often be fuelling ships calling at multiple ports. "They are unlikely to build up rapport with suppliers and will usually be working with people they don't know," noted WFS.

"In this instance, a trusted intermediary who knows all the suppliers and the nuances of each market would step in to minimise risk."

Similarly, suppliers cannot know every buyer.

"Suppliers will understandably be reluctant to open credit lines to companies they do not know, especially on a one-off basis."

But they will be "willing to deal with - and offer credit to - a trader with an established presence in the market".

"Such a first-rank trader would take on the credit risk of the buyer and pay the supplier directly," WFS wrote.

And since bunker traders aggregate volumes, they have significant buying power at their disposal and "can secure favourable prices".

According to WFS, traders are worth the cost as they can facilitate "communication between all the parties involved in the bunker business and, where possible, leverage their own physical supply assets".

In a recent earnings call to discuss the company's third quarter results, WFS president and CEO Michael J Kasbar said that "low pricing and a lack of volatility [in the market] has pushed the traditional reselling and underwriting model to supply and transportation". 

The company posted a loss in the third quarter on elevated tax payments.