Bunker fuels’ availability and compatibility still remains as a concern for shipowners and operators.
Argus asked Danish bunker fuel supplier Monjasa chief operating officer Svend Molholt about his views on these issues.
More than 200mn t of high-sulphur bunker fuel will need to be replaced by lower sulphur alternatives. What is the expected outlook for compliant product availability from 2020?
We have direct dialogue with the oil majors, which have confirmed they will be ready with enough volume of compliant fuels and blends in the second and third quarter of 2019. They have been preparing for years and know about availability, locations and capacity.
Monjasa will be supplying very low sulphur fuel oil (VLSFO) across our physical supply areas in west Africa, northwest Europe, the Mideast Gulf and Panama from the third and fourth quarters of next year.
Does Monjasa plan to blend its own 0.5pc fuels or buy them directly from refiners?
No, we plan to continue buying the bulk of our products. We buy around 4mn t/yr of marine fuels from oil majors and the main trading firms.
How much of an impact do you think scrubbers will have and how do you see high-sulphur fuel demand post 2020?
Monjasa supports the view that the impact from scrubbers will not significantly affect the overall marine fuel market. Some shipowners installing scrubbers will benefit from engaging into contracts since availability of high sulphur fuel oil (HSFO) is likely to decrease outside the main ports.
Is Monjasa planning to sell 3.5pc fuel, marine gasoil (MGO) and 0.5pc fuel from 2020 and in what proportion?
We expect to sell primarily compliant VSLFO, but also marine gasoil (MGO). The expected increase of VLSFO is obvious, whereas the expected rise in MGO sales derives from some customers preferring a well-known product to begin with.
Monjasa is carefully considering its options for storage of HSFO post-2020. We are not going to take an opportunistic approach, waiting for ships with scrubbers, because of the purchase, shipping and storage costs involved.
There are concerns that low-sulphur marine fuel co-mingling can cause problems. How many types of 0.5pc fuels is Monjasa expecting to sell?
Co-mingling blended products has always posed a risk and will continue to do so after the introduction of VLSFO. Monjasa sources its fuels from the oil majors and establish flows that minimise the risks of co-mingling. Based on our experience, this is an approach that should also be adopted by shipowners and charterers buying bunkers. Consequently, we do not expect to sell different types of 0.5pc fuel, but will establish flows in compliance with International Organization for Standardization (ISO) standards and publicly available specifications (PAS).
Does Monjasa expect an increase in contract demand post-2020 as buyers seek more certainty on fuel availability?
We expect the new VLSFO to be broadly available, thus not inciting a particular demand for contracts in the longer run. But short term, we are seeing that some shipowners and operators are interested in securing availability and price clarity for the first three to six months of the transition period.
The price of bunker fuels is set to rise significantly, while credit lines for some suppliers are already stretched. How are bunker suppliers’ credit facilities likely to respond from 2020?
Credit lines and credit management across the shipping and bunker industries face numerous challenges and consolidation is likely to take place across the bunker industry. On average, it is clear that bunker suppliers will need further working capital and we are already seeing peers reducing standard credit days from 30 to 21 because of the consequences of the expected increase in VLSFO prices.
In terms of credit facilities, it is difficult to forecast how these will respond as structures vary from being based on financing of activity to being financed based on pure revolving credit lines.
Are suppliers likely to offer 0.5pc compatibility guarantees when buying from the same supplier in multiple geographic locations?
Bunker suppliers will be selling based on ISO and PAS standards as they do today.
How do you see compliance with the cap in 2020 and what can suppliers do to make sure that the sulphur limits are complied with?
The bunker industry needs to adjust its focus to meet regulatory and customer demand for compliance and quality focus. The demand for further transparency will accelerate the growth of bunker companies which have already adjusted their operating models. Those that cannot make the transition are likely to be disqualified by customers who are looking for a safe port.
Compliance is fundamental to the success of IMO 2020, both from environmental and commercial — providing a level playing field — perspectives. Monjasa has been preparing in many ways.
The firm has been in discussions with the Danish ministry of environment and Maritime Authorities to better understand the compliance measures Denmark will be taking, how they will work with the IMO, and how Monjasa can become part of making sure the new regulations achieve their desired effects.
Monjasa has also pushed for further integration of bunker suppliers in the enforcement of the cap. This includes taking on responsibility for only supplying HSFO upon firm documentation of scrubber installation. Currently, ship operators are only to notify the bunker supplier via email and from there the supplier has no further liabilities.
From different surveys conducted, it does appear that non-compliance may be adopted by some shipowners and operators, but we generally see and hear support for the transition. The IMO is looking at how to delegate responsibility for implementing the regulations and this is one step towards better compliance. But there are no worldwide uniform standards of fines, which is also something that may increase the appetite for non-compliance.
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Source: Argus Media
