Recent Results Could be an Ominous Sign For the Bunker Industry

Mustafa Muhtaroglu, Chief Executive, Energy Petrol - Image Credit: Mustafa Muhtaroglu

If the 2017 first quarter financials of certain shipping and bunker companies are any indication, the tough market conditions witnessed in recent years are not only continuing to take their toll on the industry, they will likely continue to do so in the run up to January 1, 2020 when the new global sulfur cap rules come into force.

"If you look at some of the recent stories - a large deficit reported by a well known trader, a dramatic drop in earnings for a large physical supplier that says it will now sell barges built only 10 years ago, and the re-structuring of a leading player - I think it raises many, many questions about what will happen over the next 30 months," Mustafa Muhtaroglu, Chief Executive of Turkish supplier Energy Petrol told Ship & Bunker recently.

"Are we going to see more consolidation or players getting smaller? Will there be less sellers, less suppliers, less barges, less credit in the market? Will there be any winners from the current situation? Who is going to survive, and who is not? Just what kind of change will we need to see before the radical regulation impact in 2020?"

Quality?

As market conditions tighten, the quality of the participants becomes increasingly important as players seek to differentiate themselves from their competitors.

"A young trader recently told me, 'I feel only the good ones will continue.' But what is it to be good in today's market? I think we may need to re-define what is to be good and to better understand what it is buyers are expecting. Is it the lowest prices? The best service? The most knowledgeable sellers/suppliers? Or all of these things? We need to understand what buyers in today's market are requiring," he said.

"I always remember when an ex-sport clothes seller became a bunker trader. Is there any room for such sellers in the market today? To answer this question I would recommend people take note of what Mr Justin Longhurst [of BP] said at a recent forum organized by IBIA and the UK Chamber of Shipping: 30 percent of demand comes from 6 percent of ships trading. Furthermore, 70 percent of demand comes from 33 percent of ships. Putting this information into perspective with the latest developments, and considering the ship owners who already have their own bunker buying departments who very successfully get much better deals than many re-sellers, we have to all think about how many players we need in an optimum market."
  
For those that are part of the future bunker market, Muhtaroglu says education must play an important part in the upcoming industry change, but even this will be challenging.

"While many ask if there are too many people in the bunker industry, at the same time I ask if there are enough well educated people in the market? I would say no. But there is no school for bunkering. It is only thanks to IBIA and a few private courses that we are providing education for our industry. So maybe it is time we had a real bunkering academy, under the IBIA umbrella perhaps," he said.

"Ultimately, I think the next 30 months are going to be exciting and we will have to take some very radical decisions and steps. We need to share more in order to achieve much needed quality and reputation goals in this new market dynamic. And most importantly, need to educate the people who will make the future markets. Now more than ever we need leaders with strong ethics to help bring the industry together to shape the future."