INTERVIEW: KPI OceanConnect CEO Bullish on Acquisitions and Competition From Smaller Traders

Søren Høll continued serving as CEO after his firm KPI Bridge Oil merged with OceanConnect Marine last year. Image Credit: KPI OceanConnect

KPI OceanConnect CEO Søren Høll is taking a bullish stance at the start of 2021, in the face of competition from smaller firms and the possibility of acquisition targets as the industry consolidates.

The merged firm came into being last year as KPI Bridge Oil and OceanConnect Marine joined forces. The bunker industry should expect to see more in the way of consolidation along these lines this year, Høll told Ship & Bunker in an interview this week.

Saved by the Bell

"With IMO 2020 there were a number of companies who were, in a way, saved by the bell, and I think we will see much more consolidation going forward in the next 12 to 24 months," Høll said.

"There will be a number of smaller companies that will definitely suffer.

"And whether the price is what it is today, whether it's $10-15 per barrel higher or lower, I don't think it matters that much."

IMO 2020 had been expected to drive a wave of consolidation last year as the higher cost of the new VLSFO blends led to smaller firms struggling to keep doing the same level of business with their existing credit lines.

March's collapse in crude and bunker prices put much of that shift on hold, but a combination of tighter credit availability and rallying prices may bring it back as a theme for 2021.

"I think we will see that [consolidation] come through less liquidity in the market, even with a relatively low oil price," Høll said.

"The ones who are not really that well organised will really face difficulties."

Acquisition Talks

KPI OceanConnect is 'definitely' keen to participate in that consolidation process through acquisitions, Høll added, and the firm is already receiving interest.

"We as KPI OceanConnect definitely have appetite for more," he said.

"And we do also actually get the invitations for talks [from smaller trading companies looking to join the company].

"The last one-and-a-half months has been quite interesting in the talks there have been.

"Though there is nothing firm yet."

KPI's parent company Bunker Holding has shown a similar interest in growth through acquisitions, with CEO Keld Demant telling Ship & Bunker last month it would be on the lookout for opportunities in this regard.

Competitors 'Trying Their Luck'

The company has also noted moves by smaller competitors to expand, and questions how well these moves are likely to turn out in the current market, Høll said.

"We see a lot of smaller trading companies trying their luck in certain markets -- we see a lot of traders opening offices," he said.

"And the question is whether that is actually sustainable.

"They open in markets where we are present, and knowing the fierce competition already in those markets, I fail to see how they can make a sustainable business out of this."

Tough Times

KPI expects a difficult start to the year for the global bunker industry, Høll said, but the markets may rally somewhat.

"The health of the industry could be better; I feel that we are looking into tough times," he said.

"I think, like what we expect with the prices, there will be a rebound on the volume as well.

"Not a lot, but I think there will be a small increase, and we feel we are quite prepared for that."

Asian Growth

The company is expecting its business to the East of Suez to show a healthy performance in 2021. Ship & Bunker's global bunker volumes surveys in 2020 showed a significant shift of demand to Asia, with Europe and the Americas comparatively underperforming.

"We see some good potential in Asia and from the Middle East," Høll said.

"We still have a very good foothold in Europe, which we expect to be able to grow as well.

"We also expect more on the US side.

"It's actually in all three areas. But there is a lot of focus on from the Middle East to Asia."

The Small Get Smaller

Last year also saw a shift in demand towards the biggest hubs at the expense of smaller ports, partly as a result of a flight to larger and more familiar locations during the uncertainty of the VLSFO shift and then the pandemic. 

The industry should not expect a rapid reversal of this trend in 2021, according to Høll.

"What we saw was there were the right qualities offered for the bigger hubs, so there was a flow of demand to those hubs," he said.

"I think it's up to the smaller areas and regions to be able to offer what is needed, to regain some of this volume."

Alternative Fuels

While the shift to alternative fuels has seen a pronounced rise up the agenda over the past year, KPI OceanConnect is not in a rush to join these markets at the expense of its traditional fossil fuel focus, Høll said.

"What we are trying to focus on right now, in the short term is to maintain and increase the market share that we already have, to ensure that we do some profitable business, to ensure that we have the right teams in place in all our offices," he said.

"Then in the long term, we follow the development of the different fuels and participate in projects where it makes sense.

"But you can easily have the tendency to forget your core business and focus on the long term with long lenses.

"We try to balance on both, because there's a lot of potential here and now."