It’s not all bad news, for now at least, webinar hears

Paul Gunton

Paul Gunton · 13 May 2020

ShipInsight


“From a commercial point of view, our activities have not really been affected that badly,” by the coronavirus pandemic, said Tim Fuhrmann, head of bunkers at SAL Heavy Lift and Harren Partner group, during a webinar last Wednesday (6 May).

He was the guest speaker in a presentation titled ‘What shipping and bunker markets tell us about the coronavirus outlook’, hosted jointly by Inatech – which provides fuel management software for shipping and ETRM systems for the bunkering and oil trading community – and the analyst S&P Global Platts.

Regine SAL Heavy Lift
The coronavirus has had very limited commercial impact on SAL Heavy Lift’s activities (image: SAL Heavy Lift)

He made his remarks during a conversation with Capt Alok Sharma, Inatech’s senior vice president, and credited the operator’s positive experience to its involvement in industrial projects connected with the renewables sector, “which keep our activities at a satisfying level.” Nonetheless, he is concerned about “the anticipated slow down in the ONG [oil and natural gas] market,” although the resulting downturn in bunker prices “obviously suits us well, because of the drop in pricing and [its] direct effect on the bottom line.”

As a result, “our first quarter – and sliding to the second quarter – has been comparatively strong compared to previous years” and although this may be a short-term effect, lasting only while bunker prices remain low, he was confident that “we will be able to ride out the storm.”

Audience poll

His optimistic view was shared by a significant proportion of the webinar’s attendees who responded to two polls conducted during the live broadcast to gauge their experience of both bunker operations and the bunker market.

Asked how the coronavirus situation has affected their bunkering activities, 21% of webinar attendees who took part in the poll said that it was having a positive effect and a further 11% said it was having no impact at all. Together, those responses just outweighed the 31% who said it was having a large adverse impact. The full results are included in the table below.

Responding to those results, Capt Sharma acknowledged that the pandemic has had a significant effect on the bunkering supply chain so the large proportion reporting a large impact “is what is expected.” But he described himself as “an optimist at heart” and underlined the positive impact that many had reported in the poll, which perhaps reflected the benefits of lower bunker costs or reduced working capital that had been suggested in the polling question as an example of a positive outcome.

A second poll also revealed a significant minority – 23% – of respondents reporting a positive impact of the coronavirus situation on the bunker markets. But the largest single proportion – 38% – reported a moderate adverse impact while a further 30% had seen a large impact.

Responding to those findings, Tamara Sleiman, managing editor, EMEA Residual Fuel Oil for S&P Global Platts, suggested that the different experiences reflected in the results mirrored the attendees’ various roles within the sector, for example whether they were suppliers, traders or shipowners.

She mentioned traders in particular, who are seeing more price volatility in the market and are therefore likely to have swelled the numbers of those reporting a moderate impact. That same volatility, however, will have had a positive impact on others because marine fuel oil “has seen relatively more demand than other transport fuels due to ongoing shipping operations,” she said.

Poll results

Question 1: In your experience, how has the coronavirus situation affected bunkering?

Option

% of respondents

No impact at all

11%

Slight impact; eg more difficult to arrange

11%

Moderate impact; eg supplies are available, but taking longer

26%

Large impact; eg supply chain or credit facilities are disrupted

31%

Positive impact; eg bunker costs or working capital have gone down

21%

Question 2: In your experience, how has the coronavirus situation affected bunker markets?

Option

% of respondents

No impact at all

3%

Slight impact; eg temporary availability problems that will recover soon

5%

Moderate impact; eg brokers and traders are seeing more volatility

38%

Large impact; eg refiners are reducing production of some grades

30%

Positive impact; eg there is plenty of availability at good prices

23%

Shipping markets

Also taking part in the webinar was George Griffiths, editor of Global Container Freight Market, Dry Bulk Shipping for S&P Global Platts. He provided an overview of the impact of the coronavirus on the container and other shipping sectors and his analysis was less positive.

“The impact of coronavirus on container freight … has been stark in the year to date,” he said, looking in particular at container volumes in the US, where export and import data from the west coast ports of Los Angeles and Long Beach show dramatic trends.

Platts tanker graph
The tanker markets saw a spike as clean tankers were snapped up for refined products (source: S&P Global Platts)

“Lockdown measures … are in force across much of the United States and industry has taken a hit so there’s simply less to export,” he said. As for imports, “the lion’s share … comes from North Asia and specifically China,” but “with coronavirus came closure of ports around North Asia, delays in shipments [and] weakening freight rates,” he said. “It’s going to be a while before the market regains its former glory.”

Much the same applies to the dry bulk market, he said, with grain the only safe market, because of its importance as a foodstuff. “People still need to eat, people still need to feed their animals.” On the other hand, as production at industrial sites fell significantly, “so did freight rates around the world for non foodstuffs,” he said. “It will be a while until industry is fully back online and … we see rates in the dry bulk market really start to pick up.”

Only tankers have shown a positive result – from an owner’s perspective – because of the demand for floating oil storage. From a charterer’s viewpoint, however, “this has been fairly tough.” Because floating storage has taken many tankers out of action, there are fewer available to “actually make trips from origin to destination, crunching supply by a greater degree than demand,” he said.

The impact was particularly seen in the clean markets, because of tonnage taken up to store refined products, although that spike was reducing at the time of the webinar. “But the fact remains, there are fewer tankers [available] to move product, either clean or dirty … so tanker owners appear fairly happy at this stage to cash in what they can,” he said.

Looking ahead to when the coronavirus pandemic is over, will there be a return to business as normal? Capt Sharma put that question to Mr Fuhrmann and he was certain that things must change. He spoke of geopolitical and socio-economic factors, along with climate change, that “will force us to plan for more adverse events like this one going ahead.”

On that basis, “I would certainly want to make preparations and arrangements to increase the stability of the business and to increase continuity and resilience,” he said.

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