FOLLOW THE MONEY TRADE FLOWS, GEOPOLITICS - AND THE 'BIGGER PICTURE' FOR SHIPPING - Birketts
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www.bunkerspot.com Volume 16 Number 1 February/March 2019
FOLLOW THE
MONEY
TRADE FLOWS, GEOPOLITICS
– AND THE ‘BIGGER PICTURE’
FOR SHIPPING
INSIDE:
HEDGING STRATEGIES CREDIT LINES
HYBRID VESSELS FUEL ANALYSIS
bunkerspot survey: trade & shipping outlook
The bigger picture
We all know that IMO 2020 will be the Big Issue for
bunkering over the coming year; but what is the industry’s
take on the wider macroeconomic and political trends whose
impact could perhaps be both deeper and longer-lasting
than the sulphur cap? Ian Taylor finds out, with the aid of
Bunkerspot’s New Year, New Outlook Survey
F
or many in the bunker industry, 2019 were predicting that the global economy which have been dropped or are coming to
will be all about preparing for the will continue to grow in 2019, but the rate an end, plus mountainous trade debt that con-
0.50% global sulphur cap, with pre- of growth will slow in the second half of the tinues in a rising interest rates environment,’
cious little time to think about anything else. year. They were also speculating that this he said. ‘Additionally, growth is likely to be
But the world keeps turning and there are would have a knock-on effect on the flow of impacted by market oversupply at a consumer
developments taking place in the economic goods and shipping activity, and by exten- level, strained relationships between nations
and political spheres which could have a sion bunkering. So, we opened our survey and compromised investor confidence.’
significant impact on the bunker market – by asking our respondents if they expected China has been the driving force behind
albeit not quite as directly as IMO 2020. a slow-down in the rate of growth and the much of the global growth over the past
Bunkerspot wanted to find out more about unanimous answer was, ‘Yes’. Given that this few years, and so it is a useful barom-
the bunker industry’s perception of ‘the was perhaps biggest ‘Big Picture’ question eter for what might happen in 2019.
bigger picture’, so we devised a ‘New Year, of all, it was no surprise that their comments Simon Bennett, Deputy Secretary General
New Outlook’ survey and invited participants here foreshadowed many of the topics that of the International Chamber of Shipping (ICS),
from all sides of the community to take part. we covered in greater detail later in the survey. picked up on this point: ‘The Chinese econ-
Panos Panousis, Managing Director of omy appears to be slowing down with 2018
GLOBAL GROWTH_____________ Infospectrum, explained why global growth GDP growth officially reported at 6.5%, the
will slow. ‘Factors impacting growth rates slowest for many years and possibly more
In the run-up to the New Year, many analysts include quantitative easing programmes; like 5%, with an increasing proportion of
28 www.bunkerspot.com Bunkerspot February/March 2019
bunkerspot survey: trade & shipping outlook
this comprising growth in services, rather
than manufacturing and infrastruc-
ture development, which don’t generate ‘All shipping demand
the same demand for shipping services. is derived from
‘Combined with uncertainty about the trade
dispute between China and the US, plus global economic
sluggish growth in Europe (with Germany in
technical recession and uncertainty about
activity and the
the UK leaving the European Union (EU)) interest in trading and
it seems possible that growth will stall.’
Trade wars featured in almost every- exploring the benefit
one’s view on global growth – and US/ of comparative
China relations (which we will return
to later) was a particular concern. advantages. When
Harry Theochari, Partner, Global Head of
Transport, Norton Rose Fulbright LLP, con-
huge concerns about the impact of Brexit;
the Chinese economy grew at its slowest
the heat of the
sidered: ‘With continuing China/US trade rate in 2018 since 1990 and for sure this will economic expansion
talks in the short term and more importantly have a negative impact on global growth.
a slowdown in the Chinese economy, as well A lot of specific industries are reported to comes off, shipping
as the volatility that we are seeing in stock be suffering now, anything from car-mak- will be affected too.’
and commodity markets, there is very likely ing to mobile phones. It is possible that new
to be a slowing down in economic activity.’ sanctions will hurt economic growth too.’ Peter Sand, BIMCO
Nicholas Woo, a Partner in the Shipping Rahul Sharan, Drewry‘s Lead Research
and International Trade Team at Birketts Analyst on Dry Bulk, pointed out that the
LLP, warned: ‘Unless the trade war between trade war’s impact on the Chinese econ- be growth. To quote John Phillips, Head
China and the US is resolved quickly, this omy will ‘trickle down to other Asian of Bunker Credit Management, Global,
will adversely impact both economies, which economies’. Sharan added: ‘The inflation- with GP Global: ‘[The] rate must slow but
will, in turn, affect the rest of the world.’ ary pressures are also expected to rise and growth will continue as there are no indica-
Timothy Cosulich, of the Fratelli Cosulich there is fear of increasing interest rates. tions of mechanisms that could retard it.’
Group of Companies, believed that: ’Tensions All of them put together, the global eco- If there is to be a slowdown in global
in international relationships will have an effect nomic growth might come under pressure.’ growth, what could it mean for shipping?
on global trade in terms of potential slow- Peter Sand, Chief Shipping Analyst with One of our anonymous contribu-
down in volumes and increased uncertainty.’ BIMCO, saw a glass that was both half- tors offered this succinct equation: ‘Less
Paul Millar, Head of Global Credit for Bomin empty and half-full: ‘Europe is slowing down trade less ton miles less bunkers.’
Group, joined in the chorus of concern over from the peaking in late 2017. Trade wars Sand had a clear view: ‘All shipping
China/US relations, and was the first to intro- are still raging and more barriers to trade are demand is derived from global economic
duce the ‘B’ word (that’s Brexit, not bunkers): erected than torn down. On the upside, the activity and the interest in trading and explor-
‘The trade war started by Trump is having EU is talking about a trade deal with Australia ing the benefit of comparative advantages.
an impact on certain trades and buying atti- and the Comprehensive and Progressive When the heat of the economic expansion
tudes. It impacts on share price and the Agreement for Trans-Pacific Partnership comes off, shipping will be affected too.’
financial success of affected companies (CPTTP) is moving ahead now. Not all Neil Godfrey, Group Sales Director,
(note increased stock market volatility of late). bad, but not enough to lift growth further.’ GAC Group, identified which sectors
‘The US economy looks like it could be One should point out that while the rate could feel the effects most: ‘Capacity
heading for recession; for Europe there are of growth may slow down, there will still demand will reduce – mainly for
Our pool of contributors for the Bunkerspot 2019 outlook survey wasn’t huge but it was carefully selected and does offer a cross section
of opinion from bunker suppliers, shipping associations, consultants, analysts, service providers, legal experts and researchers.
Some participants answered the survey questions and also shared their market insights with excellent comments, but they preferred
to keep their contributions anonymous. We have, of course, respected their wishes. Others gave generously of their time, answering
the multiple choice questions and adding some depth to the survey statistics, but they chose not to leave comments.
We thank everyone for their contributions – and we are especially grateful to the following:
Simon Bennett, Deputy Secretary General, Paul Millar, Head of Rahul Sharan, Lead Research
International Chamber of Shipping (ICS) Global Credit, Bomin Group Analyst, Dry Bulk, Drewry
Timothy Cosulich, Fratelli Cosulich Panos Panousis, Managing Harry Theochari, Partner – Global Head of
Group of Companies
Director, Infospectrum Transport, Norton Rose Fulbright LLP
Unni Einemo, Director & IMO
Representative, International Bunker John Phillips, Head Bunker Credit Adrian Tolson, Senior
Industry Association (IBIA) Management, Global, GP Global Partner, 20|20 Marine Energy
Neil Godfrey, Group Peter Sand, Chief Shipping Analyst, Nicholas Woo, Partner, Shipping and
Sales Director, GAC Group BIMCO International Trade Team, Birketts LLP
Bunkerspot February/March 2019 www.bunkerspot.com 29
bunkerspot survey: trade & shipping outlook
containers and Ro-Ro, but possibly break- More than 80% said there may be
bulk/bulk cargoes, such as steel and coal.’ more debt restrictions – but not all
Adrian Tolson, senior partner with 20|20 thought this was necessarily bad news.
Marine Energy, was forthright: ‘Without doubt Sand took a robust view: ‘Should higher
a slowdown in commodities will hit all shipping interest rates come around, it will be pos-
sectors. This would seem to indicate a less itive. Interest rates set the price of money,
than stellar world for shipping in 2019, unless when that is zero – something is not right.
that scrapping rate increases dramatically!’ The ultra-low interest rates have also meant
Phillips also picked up on the prospect of that outside investors have not been overly
scrappage: ‘There is an oversupply of ton- excited about the returns from shipping.
nage already and whilst this should create Something that has not been of benefit to
a negative impact the impending changes the wider economic recovery of the industry.’
relating to fuel burn mix means that there Cosulich was also sanguine: ‘In this
will be increased/change tonne mile sce- case the impact could be a positive one.
narios and a culling of some tonnage.’ Free money has brought some not very
The ‘impending changes’ to the ‘fuel burn professional players to take on unrea- ‘The prospect of new
mix’ is, of course, an allusion to IMO 2020.
Like ‘Brexit’ in a British political debate, IMO
sonable risks in the bunker industry in
the last few years. A tightening of liquidity
debt restrictions isn’t
2020 intrudes into every discussion about should benefit solid and prudent players.’ a big negative as
bunkering. Even when IMO 2020 is not itself Theochari gave a measured response:
the subject of conversation, it colours how ‘Global economies are driven by consumer
there are those who
one views almost every topic. As Bennett demand. Any slowdown in consumer demand would say it is exactly
said: ‘While demand for shipping (and bun- is bound to have a negative impact on eco-
kers) is inextricably linked to world trade, other nomic growth. I am not convinced that we what the market
events can determine the tonne-km demand
for energy and bulk products. Moreover, the
will necessarily see interest rate rises. There
is a lot of instability and concern about the
needs. The well
profound change expected due to the 2020 future in many major economies and this founded, financially
sulphur cap may have positive benefits for the
bunkering industry, if not for ship operators.’
may result in governments and/or central
banks refraining from raising interest rates.’
capable businesses
Woo also flagged up IMO 2020: ‘The coming Woo commented: ‘If there is going to be a will survive. Natural
introduction of MARPOL Annex VI in 2020 will threat of rising inflation caused by an overheat-
cause great uncertainty in the shipping and ing economy, then a gradual rise of interest selection!’
bunkering industry for a few years. This uncer- rates may not be a bad thing. However, if the
tainty will start to be felt before Q4 of 2019.’ global economy is slowing, then it seems John Phillips, GP Global
unlikely that interest rates will rise. As to ship-
CREDIT AND INTEREST RATES__ ping, I think the industry is not as tied to
interest rates as it is to availability of funding.’ impact on the bunker industry. Phillips saw
There has been talk in the media that we The prospect of belt-tightening consum- economic Darwinism in action: ‘The banks
may see a rise in interest rates by central ers and struggling mortgage-payers is not have been rolled a few times in the last 12
banks in 2019 in a bid to end an era of ‘free an appealing one. Paul Millar warned: ‘If con- months and a rise in interest rates will have
money’. This could make it more difficult for sumer spending falls, the consequences an impact, though, as a trader, our nat-
consumers to take on new debt (thereby could be catastrophic economically. We ural reaction would be to pass that cost
putting pressure on consumer demand). It hear consumer/household debt is increas- on. The prospect of new debt restrictions
could also push more struggling and low- ing, a trend that cannot just continue and will isn’t a big negative as there are those who
profit businesses (including perhaps some likely halt if there is a rise in interest rates.’ would say it is exactly what the market
bunker players) into bankruptcy. We asked our Many of our respondents looked at how needs. The well founded, financially capa-
respondents if they shared these concerns. credit and interest rates could have a direct ble businesses will survive. Natural selection!’
‘Free money has brought some not very
professional players to take on unreasonable
risks in the bunker industry in the last few years.
A tightening of liquidity should benefit solid and
prudent players.’
Timothy Cosulich, Fratelli Cosulich Group of Companies
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bunkerspot survey: trade & shipping outlook
Rahul Sharan summarised: ‘[ The] fuel oil’; and ‘Singapore may lose some
bunkering business runs on lines of market share but to Asia Pacific competitors’.
credit and if credit becomes cost- The prospects for bunkering in the
lier, smaller players will feel the heat.’ MidEast do not appear particularly bright.
Tolson spoke from his experience as a ‘Little or no growth’, ‘Fujairah is stagnat-
bunkering expert and US resident: ‘Interest ing’ and ‘Crude oil and products exports not
rates (at least in this neck of the woods) have growing, hence no growth in tanker move-
already risen and while it’s hard to see an ments’ were among the gloomier comments.
impact on consumers it has certainly had an Tolson felt that ‘sanctions will not help trade’
impact on the housing market. My biggest in the Middle East and bunkering will suffer
concern for the bunker industry is that it will be from the loss of the Iranian supply barrel.
harder and costlier for suppliers and buyers Tolson added: ‘I can see a slowdown
to finance their operations and this will hurt impacting Africa’s growth, but I am not
their business. Even the low cost of borrow- sure enough Africa-bound ships are bun-
ing from bunker traders will disappear as it will kering locally for this to have much impact.’
become more expensive for bunker traders to Godfrey, however, saw grounds for opti-
operate. I am not sure how much bankruptcy I ‘[The] bunkering mism about Africa’s bunkering: ‘Expanding
see at these relatively low interest rate levels, business runs on lines economies and more vessels serving the
but I see margins being squeezed even more.’ region, plus increasing offshore activity, will
Unni Einemo, Director & IMO Representative of credit and if credit drive demand for greater bunker supply.’
of the International Bunker Industry Association
(IBIA), was concerned for the industry that her
becomes costlier, Other contributors also felt that ‘Nigeria,
Angola and Mozambique [may be] get-
association represents: ‘Banks have report- smaller players will ting their acts together relative to past
edly become increasingly reluctant to provide activity’ and ‘Egypt may emerge in 2019’.
financing for shipping companies and credit feel the heat.’ Egypt, of course, was once a major bun-
facilities for bunker suppliers in recent years. kering hub whose marine fuel volumes were
Sometimes shipping companies struggle to Rahul Sharan, Drewry more than ten times what they are today.
pay their debts, and bunker providers may Many of our contributors focused more
have extended credit to such companies on the bunker-specific regional trends
and are not getting paid, and it becomes a to surmise that economies dominated by – with regional differences in IMO 2020
negative downward spiral. This increases commodities will have less activity and preparedness very much to the fore.
the risk of banks pulling the plug and nei- less shipping; this certainly describes Latin ‘Until we have clarity on the fuel product
ther shipping nor bunkering companies can America.’ He felt that it was ‘probably the mix for 2020 it’s difficult to make any com-
survive for long if they lose their financing.’ same story’ in the Caribbean – but warned ments,’ said Phillips. ‘Will it be a gasoil market,
that the Caribbean is ‘heavily influenced a low sulphur fuel oil (LSFO) market, a scrub-
REGIONAL HOTSPOTS_________ by Venezuela as far as oil is concerned’. ber market or a mix (most likely scenario), with
The bunker industry would do well to keep a a bias towards gasoil until further clarity on
We next asked our respondents to very close eye on Venezuela’s economic and LSFO standardisation of spec and exhaust
give their view on how economic and political woes because they could not only gas cleaning systems (EGCS) systems exists?’
political trends could affect bunkering activ- de-stabilise the region but also have knock- Woo offered: ‘I believe the bunkering
ities in the different regions of the globe. on effects for other bunker markets and industry will go through a major period of
Most respondents were reluctant to give players which have connections to PDVSA. uncertainty especially from Q4 of 2019 with
a prediction on bunker volumes in North Surveying the prospects for Europe, the introduction of the new MARPOL Annex
America. There was a feeling in some some of our anonymous contributors VI requirements. The industry will have to iden-
quarters that the US West and East Coast flagged up concerns about slowing eco- tify suitable bunkers to comply with these new
markets would be largely flat, while the Gulf nomic activity in France and Germany requirements, work with the refining indus-
Coast volumes might be slightly higher. and the possible ramifications of Brexit. try to ensure an adequate supply and try to
Godfrey was more upbeat: ‘Increased In the Asia Pacific region, the state of make sure that the major bunkering ports
gas and oil exports from the US will China’s economy will be a key issue, and will have sufficient compliant bunkers. All
increase demand for bunkers from ves- this will have a direct impact on the bunker these will make for a very challenging time in
sels loading there – in particular, those market. ‘Reduced global trade is going to the years ahead for the bunkering industry.
destined for Pacific discharge ports.’ impact Asia Pacific, with China being a sig- ‘Singapore is by far the largest bunkering
The impact of trade flows and eco- nificant part of the slowdown,’ said Tolson. port and its proximity to major refineries (like
nomic developments on South America did ’This is likely to impact demand. Perhaps Pulau Bukom) may be useful in ensuring a
not excite much response on our survey. Singapore’s volume plateau has more to do more stable supply of suitable bunkers. Some
On the anonymous contributors’ ledger, with China’s issues than SE Asian issues.’ of the other key bunkering ports are Fujairah,
we had this terse entry: ‘Slight pick- Our anonymous contributors offered Panama, Gibraltar and Rotterdam but the total
up in economies but poor avails, and some bunker-specific comments about the estimated bunkers supplied in all four of these
little interest from big bunker players.’ Asia Pacific region. These included: ‘India ports is only half of what Singapore stems.’
Commenting on South America, Tolson will emerge as a competitive location’; Millar felt that we could see some interest-
had this to say: ‘I guess you would have ‘Vladivostok will continue to pump cheap ing market manoeuvres: ‘It is possible that
Bunkerspot February/March 2019 www.bunkerspot.com 31
bunkerspot survey: trade & shipping outlook
some trading houses will transition more and notwithstanding looming problems in the Bennett speculated: ‘The result could con-
into physical bunkering. It is possible that Chinese economy, over the long term China is ceivably be more intra-regional trade, rather
concerns about 2020 (higher prices, strains likely to become the world’s largest economy.’ than intercontinental trade, with less impact on
on working capital, fears about new We then asked whether the BRI would tonne-km growth and bunker demand. It could
LSFO compatibility + bad bunkers) will generate more shipping activity and bunker also exacerbate trade tensions with the US.’
frighten some suppliers into downsizing.’ demand, and the responses were split about Panousis added: ‘The Belt and
evenly between ‘Yes’ and ‘Don’t Know’. Road Initiative has the scope to
Woo pointed out: ‘Part of the BRI includes generate more trade. But scope, implemen-
a document entitled, Vision for Maritime tation and delivery are very different stages.’
Cooperation under the Belt and Road Phillips, meanwhile, was clearly disen-
Initiative. This indicates that China consid- chanted: ‘This is a scheme that will burn out
ers the shipping industry to play an integral – its underpinning theory is that it forces the
part of the BRI. If more shipping activity is world away from the status quo, allowing China
generated as a result of the BRI, then the to dominate East-West trades, bypassing
bunker industry will similarly increase.’ Singapore and creating new ports fed by pipe-
Sharan took a similar view: ‘More demand lines, rail and road links into western China.’
for commodities such as ores will eventu- While more Chinese growth and the BRI
BELT AND ROAD INITIATIVE____ ally translate into demand for more ships may well support shipping and bunker-
and this will aid bunkering industry as well.’ ing activity for Chinese ports, we asked
China’s Belt and Road Initiative (BRI) has Tolson gave an answer in two parts: ‘Shorter respondents whether they felt that there
been one of the most talked-out devel- term: yes, and depending on the success of were ports outside China where bunker vol-
opments in global trade and logistics. We projects etc. Longer term: perhaps. While umes could be boosted significantly by BRI.
asked our respondents if the BRI will live up growth and spending are taking place ship- ‘Bunkering ports in China will definitely
to the hype and got a 50/30/20 split between ping will do fine and this will help grow new be winners,’ said Sharan, ‘but the source
‘Yes’, ‘No’ and ‘Don’t Know’ (with a few bunkering locations, although to be honest I of the additional demand will be countries
‘Don’t Cares’ thrown in). am massively sceptical that these new bunker as far as Brazil, South Africa, West Africa
Cosulich replied: ‘Yes; but only in the operations will be well (and honestly) managed.’ and Australia; hence there will be many
long term. We won’t see an effect in the other bunkering ports that would bene-
short-medium term.’ fit, including Singapore and Cape Town.’
One of our anonymous contribu- Tolson felt that we will continue to see
tors was preparing for a long wait: ‘It’s a ‘interesting bunkering options and invest-
50-year programme and will not have sig- ment’ develop in East Africa and the Indian
nificant impacts in the next five years.’ Ocean region, but added: ‘The problem is
Woo was adamant: ‘The world must not they will always struggle to be competitive
underestimate the strength, ingenuity and because oil is too expensive in this area.’
capability of the Chinese people and nation. Interestingly, Tolson did not see a major
I believe that if the Chinese people and gov- boost for bunkering in Chinese ports:
ernment wish the BRI to succeed, it will.’ ‘I cannot see these growing unless the
Sand said: ‘BRI is a mindset that has market is genuinely open to all suppliers.
already played out to some extent. It will con- The inefficiencies of limited government-
tinuously play out over the coming years and owned suppliers are pretty obvious. They
decade, bringing trade and regional geo-pol- will grow; but not to challenge Singapore.
itics to a new level. Shipping will not see this ‘Despite all the prognostications of new
as a sudden boost; more a steady inflow of
demand from an entire region – a large one.’
‘The world must not ports/supply locations removing Singapore’s
dominance, I think it will prevail due to its geog-
Harry Theochari was reassessing his view: underestimate the raphy/high oil trade volume/transparency,
‘I was a very firm believer in the BRI being a
driver for increased economic activity on a
strength, ingenuity etc. The new ports may at times be cheaper,
but they will provide too many problems.’
global basis. However, the recent concerns and capability of the One of our anonymous contributors
voiced by a number of Asian countries and offered: ‘After 2019 China will have excess
the suggestion that many do not believe in
Chinese people and 0.50% fuels and hence be competitively
the initiative or feel that it might result in their nation. I believe that if priced – hence an increase in bunker sales.’
becoming hugely indebted in an unsustainable We also had an anonymous tip-off that Sri
way to China, is causing me to rethink my view.’ the Chinese people and Lanka and Mauritius would see increased
One of our anonymous contributors felt that government wish the bunker demand. There are certainly some
there may be ‘a slow build-up of resistance in the market who would like this to be
to China’s bid for global dominance’. By con- BRI to succeed, it will.’ true, given that Port Louis in Mauritius has
trast, Bennett detected a China-wards shift recently seen the arrival of a new supplier
in the balance of power: ‘Whether or not BRI Nicholas Woo, Birketts (Stonewin) and Sri Lanka’s Hambantota
will really add trillions of dollars of investment port is reportedly poised to select a ‘global
in addition to those already planned by China, player’ to run its bunkering operations.
Bunkerspot February/March 2019 www.bunkerspot.com 33
bunkerspot survey: trade & shipping outlook
overall trade volumes and disrupting supply
channels. It could/should be bad for ship-
‘More cruise ships ping but if less efficient trades are supported,
means more demand for maybe this means more money for shipping.’
Phillips said it could be argued that glo-
bunkers, although voyage balisation is a flawed concept under its
current guise. But most of our respond-
distance itineraries are ents saw it as a good thing – and felt that it
not likely to increase would ride out the current paroxysm of pop-
ulist protectionism. ‘Ultimately these populist
significantly.’ movements have [been] demonstrated to be
unfit to face economic choices,’ said Cosulich.
Neil Godfrey, GAC Group While Theochari insisted: ‘Global trade is a
prerequisite to the well-being of the econ-
omies of most nations. There are very few
TRADE WARS AND that this sentiment was spreading to other nations that can possibly consider them-
PROTECTIONISM______________ countries and – if it is – what the conse- selves to have the ability to be self-sufficient.’
quences for shipping and bunkering might be.
Many of our respondents had already bun- ‘The concept of America First protect-
dled their broad opinions about trade disputes ing US citizens is an understandable and
and protectionism into their opening answers appealing message to many people in that
on global growth. But we also invited them to country,’ said Millar, ‘and the concept no
share more thoughts on the US/China dispute. doubt appeals and resonates with many
‘The US-China trade war is already affect- more people around the world, if they also
ing soybean trade,’ said Sharan. ‘Soybean feel hard done by as a result of perceived
exports had been rising sharply till 2017, but unfair trade practices and restrictions.
now the US is finding it difficult to replace ‘The proposition of “[Your] Country First”
China and there is a substantial decline is a message that struck a chord with a lot of
in soybean trade on the US-China route. UK citizens who voted for Brexit. But an overly BREXIT AND THE EUROPEAN
Additionally, the trade war has started hurt- isolationist and protectionist attitude to trade UNION_______________________
ing the Chinese economy and this could can be massively damaging – we already see
affect China’s manufacturing as well. In how other countries retaliate with tit for tat Perhaps the most notable example of pop-
such a case, this will hurt shipping as well.’ tariffs. Ultimately, if global trade is damaged ulist expression in recent years was the
While Phillips argued that ‘instability cre- as a result of protectionist policies, ship- UK’s Brexit referendum, which has pre-
ates opportunities’, Sand warned that ping and bunkering are inevitably affected.’ cipitated the country’s impending exit
‘limiting trade is bad for shipping’, and Millar Sharan was concerned: ‘The rise in pro- from the European Union. We asked our
believed: ‘Trade wars always have a nega- tectionist policies is a reality and growing respondents if they believed that Brexit
tive outcome, rarely is there a clear winner.’ regionalism will hurt shipping demand as (assuming it goes ahead) will be a positive
He added: ‘The trade war is not good for well. After the US, the EU has also started development for trade, shipping and bunkering.
shipping: slap tariffs on major products and moving on similar lines. The EU plans to The result was split evenly between ‘Yes’ and
commodities and buyers will look elsewhere impose import quota on steel imports and ‘No’, but ‘Don’t Know’ just shaded the vote.
where the product is cheaper and that is often similar measures are being considered in Theochari was thinking positively: ‘The
closer to home (as we see with soybeans).’ India on iron ore imports. Such policies will United Kingdom is and will remain a great
On a positive note, Theochari felt that hurt shipping demand in the long term.’ trading nation. Whether Brexit proves to be a
the US and China ‘will inevitably reach a Sand was succinct: ‘Shipping feeds on positive development will very much depend
trade agreement’ because ‘it is not in either globalisation – any anti-globalisation move- upon the UK’s ability, not only to negotiate
nation’s interest to pursue a prolonged ments are thus negative to shipping.’ new trade agreements, but also to ensure that
trade war where there will be no winner’. Some of our respondents warned that pro- its existing trade with the EU, its biggest trad-
Sand commented: ‘We expect the even- tectionism is a weapon that can boomerang ing partner, is maintained. Personally, I am
tual unwinding of the trade war to take back on the country that attempts to use it. very confident that after some inevitable short-
some time. There are no quick fixes to a According to Godfrey: ‘US trade con- term issues, the UK’s maritime industries will
situation that has reached a deadlock like traction means enhanced opportunities flourish and continue to be a huge contribu-
this one. Great to see that talks are now for other trading nations. Those who tor to the economic wellbeing of the nation.’
happening; hopefully it will result in some- seek to expand their international trade Millar felt that there is still a great deal of con-
thing that will resume seaborne trading.’ should be looking to take advantage.’ fusion: ‘Most people are too polarised to make
The passion over the US/China trade dis- Tolson considered: ‘If China sees the US a sensible judgement – even this question is
pute has been fuelled by the ‘America First’ retreating from its relationship with them, then too simple: a hard Brexit (as I understand it) is
movement and Donald Trump’s Presidential they will seek out those who are easier to trade expected to result in considerable but short/
victory in 2016 was supported by (among with. This will be the same if the US excludes medium term chaos. A soft Brexit is expected
other things) a populist distrust of globalisa- other trading nations. Overall this creates to be less disruptive to business (and therefore
tion. We asked our respondents if they felt less efficient global trade patterns impacting shipping and bunkering). However, most of us
34 www.bunkerspot.com Bunkerspot February/March 2019
bunkerspot survey: trade & shipping outlook
do not have the economic understanding to scrapping and that has to be good to shipping.’ in the treasury than any other “normal” year.’
make an informed judgement. Even the con- Sharan picked out both the sector and Einemo commented: ‘Tanker opera-
cept of a hard/soft Brexit is not clear to most the geographical regions to watch: ‘I believe tors, in particular those operating product
people. As Parliament cannot even reach a LNG shipping will be on a high in 2019 tankers, may see opportunities to take
consensus about the right way forward, it and trade on two major routes, US-Asia advantage of changing and potentially
is most unlikely that any of us can really say and Middle East-Asia, will grow further.’ increasing oil product flows resulting from
which option will be best in the longer term. Godfrey agreed with Sharan on LNG redistribution of HFOs and middle distil-
‘Theresa May’s Brexit deal was rejected potential: ‘LNG is a growing energy source. lates caused by changes in bunker demand.
by Parliament. The EU seems to be standing Although traders will seek to minimise freight, ‘In other freight segments, owners may
firm in terms of not offering any new conces- some projects are still long term and long decide to scrap old vessels with poor fuel effi-
sions – and, in a sense, why would they? So, haul, e.g. the Cheniere contract to supply ciency, in particular if they have not yet installed
if there is a “hard Brexit”, trade flows will inev- CPC Taiwan for 25 years. Additionally, LNG ballast water treatment systems. Strong, well-
itably be disrupted. Ultimately, solutions will spot trade is growing, within which cargoes financed shipowners may be waiting and
be found to facilitate smooth trade flows once will be shipped long haul.’ Godfrey also pre- watching to see if scrapping of old tonnage
again. But if we assume disruption to ship dicted growth for the cruise sector, adding: will increase enough to eliminate oversupply of
movements there are obvious financial con- ‘More cruise ships means more demand for ships and even tighten the market sufficiently
sequences, perhaps temporary, for anyone bunkers, although voyage distance itiner- to support fleet expansion. Some owners
involved in UK shipping and bunkering.’ aries are not likely to increase significantly.’ may plan newbuild projects focusing on
Woo judged: ‘I do not think Brexit will One of our anonymous contributors painted bringing low-emission ships into their fleets.’
have a significant impact on the global ship- a rather bleak picture: ‘Late 2019 smaller Phillips didn’t want to make a
ping industry as a whole, although there will tanker demand will grow to reposition new snap judgement: ‘Wait to see what
obviously be a local and knock-on impact.’ bunkers and blend stocks, [but] few other sec- the product fuel burn mix will be.’
Godfrey believed Brexit could give bun- tors or regions [are] expected to experience Millar was circumspect too: ‘It is hard for
kering a boost: ‘Tariffs are likely to come into growth – we are entering the next recession.’ anyone to plan if they don’t know what their
place between the UK and the EU. This means Woo, meanwhile, felt that bunkering major cost (fuel) will be. Concerns over avail-
that UK will need to conduct wider trade out- strategy could be integral to success: ‘I ability and compatibility will feature in the
side the EU. This should increase tonne/mile think shipowners who have installed or are thinking of shipowner plans. Some owners
demand and with it the demand for bunkers.’ installing closed loop scrubbers will ben- will have the confidence and financial capa-
We asked our respondents if they believed efit the most in 2019. Greek shipowners bility to carry on expanding, regardless of
that Brexit would spur more EU members appear to have been particularly well pre- the uncertainties of 2020. It is inevitable
states to push for reform, or even follow the pared. They have demonstrated their usual that many owners, in some cases because
UK’s exit strategy. Theochari volunteered that: canny and savvy instincts in this respect.’ stretched finances afford no other options,
‘Greece and Italy may be prime candidates.’
Woo commented: ‘There has already been
talk about leaving the EU from Catalonia in
Spain and in Italy. This will probably increase
after Brexit.’ The turmoil that the UK has
been experiencing, however, has not been
a great advertisement for leaving, which
probably informed Cosulich’s verdict: ‘Yes,
there will be a push for reforms. No, there
won’t be any attempt to leave the EU (par-
ticularly given what the UK is going through).’
SHIPPING FORECAST_________
Putting politics aside, we next focused on the IMO 2020___________________
two global industries whose interests overlap will just sit back and wait and see what hap-
in bunkering: shipping and oil. We asked our At the time of compiling this survey, the pens in 2020; and if the new low sulphur
respondents which shipping sectors or regions debate over the use of open loop scrubbers environment is not as costly or potentially trou-
might show strong growth or profit in 2019, was gathering steam, so Woo’s comment may blesome as many predict, they will have the
with possible consequences for bunkering. prove particularly apposite. It also segued confidence to develop their business then.’
Millar offered: ‘I expect chemical tanker neatly into our supplementary question: Tolson advised that while ‘no one is
operators to have a better year given the did our respondents believe that IMO 2020 making a shipowning decision right now
smaller orderbook we see today – and will impact shipowners’ plans to expand without considering 2020’, we also ‘need
prospects are good for product tankers.’ their fleets and/or move into new territories to be careful not to overplay the impact of
Tolson targeted tankers too: ‘I would or projects in 2019? About 80% said ‘Yes’. IMO 2020 on shipping. He added: ‘IMO
still think tankers get a benefit as we ‘Most people have worries on their mind 2020 will have a big impact on shipping,
move to 2020. I can’t see 2019 being when thinking of 2020,’ said Sand. ‘Most but a slowdown in global trade – self-
a banner year for any part of ship- people think it will lift cost – and they are right. inflicted or otherwise – is far more important.’
ping. Of course, 2020 might cause some This could mean money is kept a bit longer Bennett pointed out the (projected) ‘far
Bunkerspot February/March 2019 www.bunkerspot.com 35
bunkerspot survey: trade & shipping outlook
higher cost of bunker fuel is likely to accel- infrastructure and tankers to carry the oil.’
erate early recycling of less fuel-efficient Millar brought us back to the IMO 2020
ships’ and their replacement by new tonnage. issue: ‘I have no idea about oil prices for
Godfrey gave his view on scrubbers and the whole of 2019 though towards the end
scrapping: ‘Shipowners will plan fleet replace- of the year as owners start to use the new
ment or expansion according to their forecast low sulphur fuels, costs will inevitably rise.’
about 2020 i.e. whether to take the scrub- One of our anonymous contributors
ber route or operate on the new low sulphur expected to see ‘a softening of prices over
fuels. They will specify newbuilds accord- first three quarters in the absence of any
ingly. Some may scrap older ships earlier major political storm’, but then upward
than anticipated, but only if they can secure pressure in the fourth quarter as demand
building slots which will allow them to replace rises and there is a propensity to pur-
the tonnage to be scrapped at the right time.’ chase sweeter crude oils because of 2020.
Tolson concluded with a nod to one of
OIL PRICES___________________ this year’s Oscar nominated films: ‘I have no
‘IMO 2020 will For our final question, we asked our
real idea [where oil prices are going]. Does
anyone? But if global economic activity slows,
have a big impact respondents to speculate whether
oil prices would go up or down, and
we don’t sanction Russian oil and IMO 2020
on shipping, but a what this might mean for bunkering.
does not destroy the refining industry, then you
have to believe that oil prices will be cheaper.
Sharan gave a carefully balanced
slowdown in global response: ‘We believe that oil prices will mar-
If this happens, then only a war will save us.
Where is Dick Cheney when we need him!’
trade – self-inflicted ginally firm in 2019 from the current level.
Bennett signed of f with a com-
However, when compared with the average
or otherwise – is far price of 2018, oil prices might fall in 2019.’
ment which should serve as a warning
for all survey makers and readers: ‘No
more important.’ Woo took a more long-term view: ‘One must
remember that with the advent of fracking,
one ever gets these predictions right!’
the US is now a net exporter of oil, exceed-
Adrian Tolson, 20|20 Ian Taylor
ing even Saudi Arabia. This is bound to have
Marine Energy an impact on oil prices in the long term. The Contributing Editor
main problem with US oil is lack of sufficient Email: ian@petrospot.com
INTERTEK SHIPCARE
2020 SULPHUR CAP
ARE YOU PREPARED?
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will be required to comply with the IMO 0.50% Global Sulphur cap. The new limit represents a considerable change for a range
of stakeholders within the marine supply chain but not least for fuel purchasers who will have to reconsider their individual
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36 www.bunkerspot.com Bunkerspot February/March 2019
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