10-05-2018

Singapore’s bunker industry deals with demurrage claims after off-spec fuel issues

Some demurrage cases had arisen in Singapore after the city-port was recently hit by a few off-specification bunker fuel issues, resulting in some affected vessels to debunker, industry sources told S&P Global Platts this week.

“I have one such case [demurrage claim] and there are a few out there,” a bunker trader said.

Even suppliers who did not supply off-spec bunker fuel were affected as they were not able to load on-spec product from the terminal, and when it became available, there was a backlog of barge deliveries.

Singapore is the world’s largest bunkering port. In 2017, bunker sales in the city-port rose 4.2% year on year to a record 50.6 million mt, the Maritime and Port Authority of Singapore data showed.

“A lot of suppliers got hit with delays and demurrage claims. In such cases, we try to negotiate with the ship-owner,” a supplier said.

Another bunker trader said they were not affected this time. However, when such cases arise they can be quite “trying”, he said.

It is not immediately clear what was the demurrage the affected bunker fuel suppliers had to pay.

S&P Global Platts assesses a daily demurrage for 80,000 mt Aframax tankers basis no heat dirty petroleum products cargo out of Singapore at $18,500 per day on Tuesday. In March, the daily demurrage assessment ranged from $17,000-$17,250 per day. However in April when bunker prices increased, the daily demurrage assessment ranged from $17,500-$18,000 per day, showed Platts data.

OFF-SPEC BUNKER FUEL ISSUES

Fuel samples taken from a number of Singapore bunker suppliers, who made 380 CST bunker deliveries over March 23 to April 4, and April 16-18, showed the flash point ranged between 35 to 56 degrees Celsius, below the limit of 60 degrees Celsius under parameters set by the International Convention for the Safety of Life at Sea, or SOLAS, fuel testing companies FOBAS’ and Veritas Petroleum Services’ advisories showed last month.

Abrasive fuel quality was also a concern.

Veritas issued a fuel quality alert advisory on April 9 to industry participants regarding highly abrasive bunker fuel supplied in Singapore.

At that time, Veritas said it had tested several fuel oil samples representing deliveries in Singapore with Aluminum and Silicon (Al+Si) concentrations ranging from 62 to 102 mg/kg.

The Al+Si limit for the International Organization for Standardization’s ISO 8217:2010 standard for RMG 380 marine residual fuel is 60 mg/kg.

Due to the tightness in the market triggered by off-spec issues, bunker fuel prices in Singapore also surged.

Singapore delivered 380 CST bunker fuel monthly average price rose some 7.4% month on month to $393.28/mt in April, Platts data showed.

However, premiums for ex-wharf RMG cargoes had eased in the past one week, in part due to the arrival of blending stocks to make on-spec fuel oil available.

End-May and early June-loading cargoes were heard offered at plus $2.50/mt to MOPS 3.5% high sulfur fuel oil assessment, compared to premiums for H2 May-loading, which were heard done around $4.50-$5/mt.

CONTRACTUAL CLAIMS AND DEMURRAGE

Shipowners could claim for the loss of time during debunkering and rebunkering as well as for the price differential if bunker prices escalated during re-bunkering, a lawyer said, adding that he was “assisting” some of the affected players.

“We will always claim losses if we have proof,” a shipowner said.

Fortunately, the company had only one debunkering incident so far this year and all demurrage and associated costs had been paid, he added.

A bunker supplier said that it all boiled down to the personal rapport between the parties concerned.

In some contracts, the bunker barge had to arrive within four hours of the vessel docked at anchorage/terminal. If the bunker barge was slightly late, the shipowner would claim demurrage.

Sometimes, the supplier would weigh at the situation. For instance, if the supplier had to supply a VLCC and a small Capesize and was late for both deliveries, the supplier would decide which delivery would incur less demurrage cost, the VLCC or the Capesize.

“It boils down to what type of owner is in the frame. Technically, you might want to deliver to the VLCC first because the parcel size is bigger and demurrage cost is more, but it’s not always so clear cut. If you have a good relationship with the bulker and are in it for the long-term, then you might want to deliver to the Capesize instead,” he said.

Source: Platts

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