Growing concentration of fuel supply in major bunkering hubs will continue towards 2020 and offer only increased competition and low margins to physical suppliers.
Maritime consultancy 20|20 Marine Energy has warned that physical suppliers should move away from fuel supply in the major bunkering hubs and instead focus on smaller ports to reap the opportunities of a rapidly changing market. With continuing tight margins, and extreme competition, specialist physical suppliers are being squeezed out of traditional, large bunkering ports or reduced to providing just credit facilities and logistics services.
20|20 Senior Partner Adrian Tolson concluded: “Rationalization is the by-word in today’s bunkering industry and major physical suppliers, just like major bunker traders will have to get used to this. Traders are seeing their share of the market shrink and physical suppliers are seeing their supply volumes erode as they rationalize away from the low margin, larger supply locations. The right strategy for independent physical suppliers will be to ensure that they have the expertise and flexibility to recognize, and then quickly move into the smaller, higher margin markets. Those that do will reap the rewards.”
20|20 Marine Energy believes that physical suppliers should concentrate their efforts and resource on supply locations that provide a true return for their expertise and the genuine value that they can provide to ship owners and operators. This means capitalizing on supply locations that are too small or too complex for a cargo trader, and where the logistical margin exceeds the benefit of fuel cost minimization.
The growing concentration of supply in major bunkering hubs is a trend that will increase as the market moves into a post-2020 supply environment. Supply locations that lose volume to this trend, and those that have trouble meeting 2020 supply specifications, will likely become ideal supply locations for the physical specialist, says Tolson.
“Physical suppliers should leave the major ports for the refiners, cargo traders and those who have an obvious competitive advantage. Let them focus on fuel cost minimization, and shaving margins to a point where only the best blenders and cargo sourcers can make money.
“Physical suppliers need to stay away from major bunkering ports, unless there is a specific niche opportunity or there is a desire to run a logistics operation that is more focused on barging, rather than bunkering economics,” he said.
The opinions expressed herein are the author's and not necessarily those of The Maritime Executive.