The 1st January of 2020 will bring a seismic change to the shipping industry; the most impressive change that the industry has faced ever before. This is what Inatech, a Glencore company that provides bunker management solutions, says and suggests good preparation in a timely manner in order to avoid the bad consequences of a market disruption.
Inatech is another company who highlights the risks of availability on both the high sulfur and the low sulfur fuels. With most of the demand to change into 0.5% sulfur fuels, it is still unclear whether the bunker suppliers will continue to offer 3.5% sulfur fuels and for how long. On the other hand, logistics for supplying 0.5% sulfur fuels is not yet ready therefore shortages may appear in various ports globally especially in small and remote ports, Itatech adds.
Another area of concern is the lack of transparency on the specification of the compliant fuels. Apart from the max. sulfur all other components are unknown and each refinery may offer their own product. Defining that specification is not simple since there are not yet ISO parameters to stick with as happens with the 3.5% sulfur fuel.
Buying fuel is expected to become a more complicated process, because blending bunkers is like blending wine, Inatech notes. There are various ways to do this process and every supplier will try to minimize their costs by making cuts on materials and the blending process. As a result, given the lack of transparency which characterises the current market we are entering a “brave new world”, according to Inatech, where we will have no idea about the process that each fuel has been produced or to what specification it will arrive in ship tanks.
Under the circumstances, shipowners are responsible to test the new compliant fuels to ensure compatibility, however it looks like early testing is not easy since most of the suppliers are still offering such products against a specific contract and not spot in the free market.
According to Inatech, until now, the bunkering market has been a niche market which works with a standardised product and specific supply channels. However, all this will change dramatically post 2020. The product is not going to be standardised, while more suppliers who will focus on more sophisticated and tailored solutions will enter the market.
In the middle of all this uncertainty, Inatech calls shipowners to get prepared within the next months in order to be able to compete within the new environment. Preparing their ships with cleaning the fuel tanks and/or installing the relevant equipment (e.g. scrubbers) is one side of the coin. The other side of the coin is preparing their buying strategy to take into account the new variables.
While analysing the new variables, transparency comes into the front. According to Inatech “additional market data will be required and systems and resources must be put in place to analyze this data and to manage new workflows”. Furthermore, a change on buying strategy from buying spot to establishing contracts might help Buyers to manager risks associated with availability, price variation and counter-party performance.
To survive post-2020 a complete behavioral change is needed; it will not be possible to continue current practices and expect the same results, Inatech notes.