IMO2020: Bunker CEO Sees Higher Prices Presenting Credit Challenges

Wednesday October 10, 2018

Securing the credit to cover the exposure from bigger fuel bills come January 2020 will trouble some bunker companies, a senior bunker company executive has said.

Since IMO2020-compliant bunker fuel is expected to be considerably more expensive than high sulfur fuel oil as it is currently priced, additional working capital, credit or marine insurance may be required, according to Cockett Group CEO Cem Saral.

"Liquidity will be a challenge for many players in the bunker industry come 2020, as the industry typically runs on unsecured credit terms and on extended payment days," Saral was quoted as saying by price reporting agency SP Global Platts.

"For a market participant with obstacles in having access to commensurate working capital and liquidity, we see many challenges."

The executive suggested some proportion of demand or certain customers may need additional liquidity which, in turn, may involve increased use of bunker resellers.

"Cockett Group applies rigorous KYC [know your customer], governance, risk management and compliance on its day-to-day activities hence the group will remain selective in addressing the increased liquidity need that may likely arise," he said.

Market observers say that big and niche players are best placed to ride out changes in the markets that will come from the new bunker fuel sulfur specification with middle-sized players more vulnerable, in part, because of perceived increased credit requirements.