When the IMO-2020 regulations come into force, cost of compliant fuel will rise. Unless they have equipped their vessels with scrubbers, clients will need to pay a much higher price in order to buy today’s equivalent quantity of new fuels. Therefore, larger credit facilities will also be required, Glander International Bunkering CEO, Carsten Ladekjaer, has said, while speaking on the sidelines of a UAE bunker event.
According to Glander CEO, as a result, Bunker trading companies will need to pay higher attention to their credit lines and make sure that they will have the financing in place to cover the requirements for additional liquidity arising from the increase of bunker prices.
“On the credit side of things, there will undoubtedly be more risk”, Ladekjaer has said. The number of companies who will face financial difficulties may rise and some companies may not be able to afford the price increase and, finally, they may not survive, he added.
Taking into consideration that the operators with vessels equipped with scrubbers will be the minority, according to current data, it is expected that the demand for the more expensive very low sulfur fuels will rise while, on the other hand, demand for high sulfur oil will fall.
While it is widely expected that operators opting for the new compliant fuel will be paying significantly more for bunkers, it is still unclear about how much the difference on price between 3.5% sulfur and 0.5% sulfur fuel will be. There is also high uncertainty about the degree of market volatility and for how long it will last.
Market players believe that volatility will be more significant during the first half of 2020, while it is expected that as we are moving towards the 1st January of 2020 the difference on pricing between the two grades will become more transparent and, as a result, we will be able to make safer assumptions on the additional credit facilities that may be required.