Physical Suppliers Need to Stay Away from Major Bunkering Ports: Tolson

Wednesday January 11, 2017

Adrian Tolson, Senior Partner at 20|20 Marine Energy, Wednesday said physical bunker suppliers should move away from major bunkering ports and focus on smaller ports to reap the opportunities of today's rapidly changing market.

"Physical suppliers need to stay away from major bunkering ports, unless there is a specific niche opportunity or there is a desire to run a logistics operation that is more focused on barging, rather than bunkering economics," said Tolson.

"Physical suppliers should leave the major ports for the refiners, cargo traders and those who have an obvious competitive advantage; let them focus on fuel cost minimisation, and shaving margins to a point where only the best blenders and cargo sourcers can make money."

Indeed, as a result of ever tightening margins and "extreme" competition, Tolson says specialist physical suppliers are being squeezed out of the traditional, large bunkering ports, or reduced to providing just credit facilities and logistics services.

As such, 20|20 Marine Energy believes that physical suppliers should concentrate their efforts and resources on supply locations that provide "a true return for their expertise" along with genuine value that they can provide to ship owners and operators. 

"This means capitalising on supply locations that are too small, or too complex for a cargo trader, and where the logistical margin exceeds the benefit of fuel cost minimisation," the consultancy says.

As Tolson told Ship & Bunker last year, the growing concentration of supply in major bunkering hubs is a trend that will increase as the market moves into a post-2020 supply environment, particularly for the big blending centres that are also big ports with regional supply options such as Singapore, Fujairah, Rotterdam, and Houston.

The supply locations that lose volume to this trend, and those that have trouble meeting 2020 supply specifications, will likely become ideal supply locations for the physical specialist, he says.

"Rationalisation is the by-word in today's bunkering industry and major physical suppliers, just like major bunker traders will have to get used to this," says Tolson.

"Traders are seeing their share of the market shrink and physical suppliers are seeing their supply volumes erode as they rationalise away from the low margin, larger supply locations.

"The right strategy for independent physical suppliers will be to ensure that they have the expertise and flexibility to recognise, and then quickly move into the smaller, higher margin markets. Those that do will reap the rewards."