IE Week: Bunker Industry Seen as 'Rabbit in Headlights' Amid 2025 Uncertainty

As usual IE Week 2025 saw numerous bunker companies hosting events. Image Credit: Ship & Bunker

Discussions at marine fuel gatherings in London last week reflected an industry taking a pause for breath before making any major commitments ahead of this year's uncertainties.

The bunker industry is facing a bewildering array of issues this year: geopolitical turmoil that has the potential both to raise and lower demand significantly, profound changes in emissions regulations, and the raising of tariffs that could radically change global trade.

The industry is not retreating into a fully defensive stance in anticipation of global recession, but it does appear to be hesitating, waiting for more clarity to emerge before decisions involving large outlay are made.

"I think there's a bit of rabbit-in-the-headlights syndrome going around," one trader told Ship & Bunker last week.

"It's not like anyone's firmly predicting a disastrous year, but some things are probably being put on hold until we know more about what's going to happen."

A brief pause for thought would be warranted by the scale of the challenges and unanswered questions facing marine fuels firms in 2025; the level of change seen this year could rival that seen in 2020, when the IMO 2020 transition coincided with the outbreak of COVID-19.

Geopolitical Challenges

A rapid end to either sanctions on Russian oil exports or shipping diversions away from the Red Sea would present radical changes to the market.

The former would be likely to deliver a significant cut in fuel oil prices worldwide, with European ports seeing the largest benefits, while the latter would reduce global demand, in particular from the container segment, as shipping companies reverted to making shorter voyages via Suez.

Neither prospect looks particularly likely in the immediate term, but both scenarios will have to be considered as executives formulate plans for the year.

And with both situations, the opposite scenario could be imagined, with a ramping-up of the wars in the Middle East and Ukraine. Either possibility could bring in multiple regional powers, further limiting shipping activity and hampering trade.

Regulatory Changes

On the regulatory front, this year's largest changes are coming from Europe, but look set to make an impact globally.

For the emissions trading system, September brings the first deadline for surrendering allowances for emissions produced during 2024. This year also sees the phasing-in of the regulation reaching its next stage, with shipping now having to buy allowances for 70% of their emissions in Europe, up from 40% last year.

Demand for biofuel bunker blends, both within Europe and at hubs elsewhere in the world, is likely to expand significantly this year as a result. In IE Week meetings last week biofuels were already being discussed with equal standing to the conventional fuels, rather than as niche alternatives provided by specialists.

The Mediterranean ECA also comes into force this year, bringing about a global decline in VLSFO demand in favour of MGO. Adrian Tolson of 2050 Marine Energy has forecast the new ECA to add 20.2% to global MGO demand and cut 3.1% from global fuel oil bunker demand.

And beyond what's already agreed, the IMO will this year need to set out its mid-term measure plans for reducing the shipping industry's global emissions. Bunker industry representatives talking to Ship & Bunker last week expected to see a levy emerge with costs at least level with the EUA market - currently trading at around EUR 70/mtCo2e.

Tariffs and Trade

The new Trump Administration was at the top of the agenda for most discussions in London last week.

President Trump's focus on tariffs is unrivalled by any of his predecessors for more than a century, and the wide range of his targets makes it difficult for the shipping and bunker industries to know where to redirect their resources to follow shifting demand.

The tariffs on China, and the retaliatory tariffs in the other direction, pose the greatest risk of overall global trade declining. This would be likely to hit the bulker segment most sharply at first, but all shipping segments would be likely to be affected 

Some of the US imports from China will be able to be sourced from other countries in the region, either authentically or with Chinese products relabelled as coming from other countries, but a general decline in trade can be expected.

Potential tariffs on European countries would also have a significant impact on global trade, and energy exports from the US would be likely to be a focus of retaliation from the EU.

And in the Americas, tariffs on Mexico and Canada are already having an impact, with local sources telling Ship & Bunker a rise in prices can be expected as a result.

Bunker Industry's Finances

The bunker industry is heading into this year of uncertainty with relatively strong financial health.

Financial results have declined significantly since the records seen in 2022-23, but generally remain above average, while volumes climbed last year.

Bunker Holding CEO Keld Demant has indicated his firm is heading for an average result for 2024/25 with operating profit somewhere around the $50-75 million range. And World Kinect CFO Ira Birns has said his company expects marine gross profit to be down on the year in the first quarter, before stabilising on a year-on-year basis over the remainder of 2025.

Prices are likely to continue dropping over the course of 2025 as OPEC+ crude output increases and global economic growth falters. This will put some pressure on the bunker industry's margins, but may also help global sales volumes to rise.

But as ever at this time of year, the main datapoint most bunker traders will be looking at will be their annual bonus and that of their contacts at rival firms. Industry watchers looking for signs of marine fuel firms' health will need to look at job moves over the next few months; if bonus packages disappoint and traders start shifting roles more actively, it may be the first sign of the bunker industry heading into financial difficulty.