Counterparty checks are a key part of how the bunker industry does business. File Image / Pixabay
Gone are the days when bunker prices were reasonable. Now, with ever-rising oil prices, it is more than important that all players in the bunker supply chain come clean on how to conduct business.
Owners need to ensure that the vessels being chartered to a company are strong enough to pay their bunker bills; if that company defaults, then they should have a mechanism to ensure that it doesn't affect the bunker traders or the owners.
In most of the cases, charterers are buying bunker on credit, which physical suppliers are not comfortable to entertain since some charterers are without any assets or strong financial standing, or the discreet nature of the charterer's business leaves traders at the mercy of dealing with 'Risky' accounts.
If a charterer defaults on payments then traders are left hunting vessels.
If a charterer defaults on payments then traders are left hunting vessels -- going to the owner's vessels for recovery. But if the owners already have a system in place to ensure that charterers are not able to default, then this will create a very smooth system of doing bunker business.
At the end of the day, I want to ask all vessel owners around the world leasing their vessel out, if owners are not responsible for charterers' debts, then who actually is? This needs an urgent solution involving all stakeholders.
Then, in the bunker industry, a very interesting yet very sensitive part is KYC of Customers. To know the customers has been a very alien and tricky question for a long time, yet this needs to be rectified.
Most of the time if you ask a customer to provide audited financials, Ultimate Beneficial Owner details or even for company counterparties to do reference checks, then the customer starts feeling offended.
The same customer, going to a bank for credit card or loans, will give even the most minute things which banks will not even require to get credit -- but with a bunker trader, the same customer will be surprised even to be asked such things.
If customers need open credit lines, then they need to open up about their businesses.
Credit is credit, and customers need to understand this. Bunker traders are exposed, and if customers need open credit lines then they need to open up about their businesses.
This pattern needs to change and for customers -- be they vessel owners, managers, operators of agents -- an open and honest discussion on sharing company details and information through a unified channel is more than important for a healthy overall business environment.
There should be meaningful discussion among players in the shipping fraternity on how to bring more clarity on certain aspects of business, especially where credit and risk is involved. This will pave the way for yet another era of credit risk transformation, when the industry will see more strong and stable players emerge.