Marine fuel suppliers are feeling the crunch from the global slowdown in trade. With more ships being kept aground, demand for bunker fuel has also been on the decline this year.
This has prompted companies like Chemoil and Global Energy International to re-structure and diversify their business to stay afloat.
This includes expanding their current portfolio or entering markets outside of Singapore. Global bunker supplier Chemoil, a Singapore-listed company, has said it is facing more payment defaults and bad debts. This comes as shipping firms themselves are faced with falling incomes and tight cash flow as a result of the economic slowdown. The slowdown is putting more ships out of service and ship owners are finding it difficult to maintain their business. Thomas Reilly, CEO of Chemoil, said: "This year, there have been a handful, it is more of a dangerous market. Suppliers have to be a lot more selective with who they are doing business with." Higher bunker fuel prices have also put a strain on ship owners struggling to meet their payment obligations. Bunker fuel prices have jumped 20 per cent since three years ago, and have been hovering between US$650 and US$700 per metric tonne this year.This is hurting business for bunkering firms. If this continues, experts said shippers and bunkering firms which are unable to cope will eventually drop out. Bunkering is the process of supplying fuel to ships for their own use, and Singapore is the largest and most important bunkering port in the world. Recent data from the Maritime and Port Authority of Singapore (MPA) has shown that seven bunker suppliers have given up their licences this year. This compares to only one firm for the whole of last year.Recent bunker suppliers who have not renewed their licences include Hir Huat Trading, Prestige Marine Services and Gas Trade, all of which are said to be undergoing financial difficulties.
Experts also said
more bunker suppliers are taking the legal route against shipowners that have
defaulted on their payments. Goh Shu Hui, editor
of Bunker Fuel at Platts, said: "You are seeing shipowners not being able
to pay up for the bunker fuel that they are buying from suppliers, and
suppliers have had to resort to getting their money back by going to the court
system...either by suing for bankruptcy to get the money back, or simply by
going to the courts to get the vessels arrested." According to
Platts, 26 shipowners were arrested at Singapore's ports in the the first
quarter of this year, compared to 17 in the same period last year. The number of
warrants received for arrest also increased to 31 from 21 during the same
period.
The difficult
business climate is leading bunker suppliers to re-think their business
strategy. Chemoil, for
instance, has disposed assets by selling its fuel storage facility on Jurong
Island.
The company said it
also plans to diversify into markets like biodiesel to spread risk. Meanwhile, Global
Energy International, which generates 60 per cent of its revenue from
Singapore, said it is "actively looking" for opportunities to be a
physical supplier overseas.