A new era of bunkering; seizing the opportunities of a changing market

by Jan Christensen, Global Head of Bunker Operations, Bomin Group first published in Bunkerspot Magazine, February/March 2017

The developments at Bomin over the past few months have created significant interest within the media and the wider bunkering market.  Not just because of the nature of these developments, but also the decision to be very transparent in our communication.  When embarking on corporate change, the traditional trend within the sector seems to be to retreat into – rather aptly – a bunker, and remain silent to the outside world; the theory being that change is negative, and demonstrates weakness.  In our view, the reality is very different.

We have spoken about entering a new era of bunkering; an enduring trend of low crude prices impacting margins, and new regulations that have transformed the marine fuel supply chain.  We have seen increased complexities, the significant consolidation of traditional trading houses, as owners and operators look to reduce their exposure to risks by operating directly with physical suppliers.  Everywhere that we look there are changes in marine fuel supply and the procurement process.  Like any responsible business, in any sector, you need to have a strategy for sustainable growth.  That strategy has to be set within the context of how a market is evolving, and what customers need, so that you can seize the opportunities of change, and position your business accordingly.

This is exactly what Bomin has done over the past few months.  We believe that in these tough and complex times for shipping, ship owners and operators want to work with fuel suppliers that are not just founded on ensuring the quality of products and services – that must be a given – but who also have integrity, and importantly, are commercially responsible.  We believe that a fuel supplier will gain respect for running a profitable and sustainable business; one that is effectively positioned in key global markets to deliver for customers in line with their rapidly changing demands and requirements.

The changes Bomin has made have therefore been about driving growth; investing in the right areas and regions to ensure that our infrastructure and operations are calibrated to deliver against our strategy, and to provide the best products, services and solutions for our customers.  The flip side to this is that we must also be pragmatic in rationalising resource in markets and regions that do not support our growth strategy.  These are naturally the tough decisions to make, but it is commercially the right and responsible action to take.  This is a sentiment that has been widely lauded and agreed with by the majority of bunkering opinion formers; stating the fact that Bomin is getting ‘ahead of the game’ and doing what other physical suppliers also need to do.

As has been reported in the media, this decision resulted in the closure of a small number of our offices globally.  However, at the same time, Bomin also announced the expansion of our physical operations in Singapore with the launch of four new barges; the launch of two new barges in Antwerp to strengthen our operations in the ARA region; and in July 2016 we launched a physical operation in Mauritius.  At the end of 2016, we also announced the establishment of four regional hubs in Hamburg, Houston, Dubai and Singapore to support the company’s operations across Europe, the Americas, Middle East & Africa and Asia.  This trend of investment will continue in line with what is required to further develop our infrastructure.

A critical aspect in developing our infrastructure has been the requirement to build closer relationships with our customers.  It seems obvious, but never has it been more important to work with ship owners in a partnership-based way.  Ship owners are concerned about their level of exposure and risk.  The 0.5% global sulphur limit will also have a huge impact in how they fuel their vessels, as well as on their profitability (for those paying the fuel bills), and from a competitive perspective in terms of the operational, environmental and cost efficiency of their vessels and fleets.  From the perspective of the fuel supplier, it is up to us to guide them in implementing the right compliance solution, as well as ensuring that our infrastructure is calibrated to deliver it.  This can only be achieved if there is a close and trustworthy relationship.

We are all aware that the most widely used compliance solution of choice will be distillates, and distillate-based products.  However, the 2020 regulation will have an impact on the existing shortage of distillates within Europe, with a large amount of product required to be brought into the region.  Suppliers therefore need to ensure that their supply chains can guarantee the delivery of products on a global basis when and where customers need them.  They will also need to invest in existing storage infrastructure, such as reconfiguring tanks to hold clean products rather than fuel oil.

A key aspect of Bomin’s recent changes has been with these requirements in mind, ensuring that the business is positioned to optimise the strengths of the Bomin Group of companies across cargo supply, storage and barging operations, and taking more control of the fuel supply chain on a global basis.  In addition to this, as the procurement process becomes more complex, we believe that it is critical that there is a global consistency in the highest quality of service standards; the positive experience that a customer has in Europe, should be the same in Asia, the Americas and beyond.  The establishment of our regional hub structure is designed to deliver that; creating more global alignment between our physical and trading operations, and ensuring a universal quality in the products and services that we provide.

In being able to deliver this to customers, we can genuinely demonstrate the value that we can provide that goes beyond the price of the basic product.  The industry scramble to hold onto reduced margins can only go so far.  Further consolidation will lead to less competition. And in conjunction with the demand from ship owners to provide a more solution-driven approach to fuel supply, the value that physical fuel suppliers can provide in terms of consultancy, and expertise in end-to-end delivery that drives operational and cost efficiencies, and compliance, as well as risk mitigation will ring true.

There is no crystal ball that will tell us exactly where the market is heading.  However, there are clear indicators of what we can expect with the impact of regulations, changes to the make up of the fuel mix, as well as slowly rising crude prices.  For too long, the majority of bunkering companies have adopted a strategy of apathy.  That time must come to an end.  There are opportunities out there, but there needs to be a commercial realism that to create a sustainable, profitable, and growth-driven business, you have to change.  Accepting this, and doing something about it is a sign of strength, not weakness.  Those that understand this will prosper.