INTERVIEW: Bunker Holding Sees Market Normalising in 2023

Keld Demant is CEO of Bunker Holding. Image Credit: Bunker Holding

Marine fuels conglomerate Bunker Holding, the world's largest bunkering firm by volumes, expects to see the market normalising over the remainder of this year after last year's turmoil drove record profits for the company.

This week the company reported pre-tax earnings of $222.7 million for 2022/23, more than double the previous year's level and the most in its history. The previous record high of $155.2 million was set in 2019/20 during the IMO 2020 transition.

In an interview with Ship & Bunker on Tuesday, CEO Keld Demant set out what he saw behind the company's gains.

"It's down to the agility of the company; being an asset-light company, being a company that is represented worldwide, being a company that has, as is key, a valid drive to be close to the customers, understanding what their needs are," Demant said.

Geopolitical upheaval was the biggest factor for the bunker markets last year, with the war in Ukraine and its consequences in sanctions and changing tradeflows driving an overturning of a range of different energy markets.

"It was a surprise to all of us, what happened," Demant said.

"And when it happened, we reacted very quickly and we navigated in this new business environment.

"One of the key drivers was that the price went up dramatically in a short period, and to show support and give the credit needed, you need to be really financially strong."

Volumes Decline

But while Bunker Holding's profits surged last year, the company noted a small dip in its sales volumes.

Ship & Bunker's Top 10 Bunker Companies for 2023 report estimated Bunker Holding's volumes as being little changed on the year at 30 million mt in calendar 2022.

But looking at the 2022/23 financial year, with the firm's revenues rising by only 7.6%, compared to a global average VLSFO price gain of 18.7%, the numbers point to a modest fall in volumes compared to the previous year.

This was not driven by a general decline in the market, or by a conscious effort to steer clear of lower-margin sales, Demant explained.

"Even with low-margin business, as we have the working capital, we are pleased to do this," he said.

"It is more due to the price increase; there were some clients who we didn't perceive as being creditworthy any more.

"I mean, if you send the same amount of oil, but at a much higher price, you have to make your credit assessment.

"That was one part; the second part was that there were a few clients who had a different view on the conflict in Ukraine to what we had, and we said that we then don't want to conduct that business."

The company has a relatively positive outlook for the remainder of this year, Demant said.

"I would say that the market as a whole will be pretty ok," he said.

"Certain segments are starting to get weaker rates, and that will start to influence them, but overall world trade, I think, will be pretty much up to speed.

"Especially after we have been quite selective on who we can do business with, I find the segments and the categories that we are in to be quite stable.

"I think they will have a bright future.

"I don't foresee any further sanctions or restrictions influencing our business negatively; if anything, it may actually be positive."

Spending the Windfall

A key challenge for the conglomerate's management this year will be deciding how to reinvest its record profits into the business. 

Acquisitions in conventional bunkering are unlikely, according to Demant.

"The traditional either back-to-back trader or supplier would have to be very, very special for us, if we should look into it, simply because we would be investing in a business that over the next decade will be decreasing," he said.

But the firm may take more of an interest in green fuels, he argued. The firm has set a target of joining 10 green fuel projects by the end of this year, and earlier this week announced a partnership with Yara Green Ammonia.

"We do see in the new green corridor, there are a lot of opportunities," Demant said.

"We don't necessarily want to buy them, but we will build a lot of partnerships in the green fuel area, and we will invest quite some money in that.

"We have already by now employed quite a few people in green fuels, we are scaling up on the digital agenda and for some years we have invested quite heavily in the entire ESG agenda, which will require much more reporting and accounting in the future."