The bunker industry can expect to undergo further consolidation in the run-up to 2020 as tightening emissions regulations impose greater costs and test credit lines, according to global supplier Bomin Group.
The International Maritime Organization will cut global marine fuel sulfur limits to 0.5% from 3.5% at the start of 2020, forcing most shipowners to switch to burning cleaner, more expensive fuels.
That increase in costs will put pressure on credit conditions across both the bunker and shipping industries, according to Paul Millar, Bomin’s head of global credit.
“I think we will see a trend over the next two years of the smaller bunker traders being gobbled up by the larger players across the industry,” Millar told the ARACON industry event in Rotterdam Thursday. “Some will survive, but others will be hit by bad debts or banks withdrawing their support.”
Credit conditions in the bunker industry have been under sustained pressure since the collapse in crude prices in 2014 and the unexpected bankruptcy of Copenhagen-based OW Bunker later that year. The consequences of that crisis are still hitting the industry, Millar said.
“The aftershocks are still being felt, as far as I’m concerned,” he said. “I think we’re less tolerant as a result — it’s a much tighter environment we’re working in now.”
“Nearly everyone is saying that payment is getting worse across the board,” he added. “Nearly everyone in credit management is requesting…guarantees more often, as well as more financial information.”
Most bunker credit managers also report carrying out more vessel arrests to recover unpaid debts this year than five years ago, Millar said, despite these arrests now often being less successful in recovering money.
Bomin is now reviewing the creditworthiness of its customers to see which may come under the most pressure in 2020.
“We are updating credit lines to get us in line with what we would expect in two years’ time,” Millar said. “It’s already in our mindset to check whether a company will be in shape then.”
“There will be some customers that, maybe we’re thinking today that they can get through this current market, but maybe we’ll think about backing off from selling to them in two years’ time,” he added.
Source: PlattsPrevious Next