Bad Boys
9th April 2015 11:45 GMT

Think of an industry that carries 90% of the world’s cargo. It is the most efficient mode of transport, it creates only 3% of the total sulphur oxides (SOx) emissions and is the most cost effective solution to logistics. This is the shipping industry.

Other forms of transport, including rail, road and air create far higher emissions yet it seems that all efforts to clean-up the transport sector have been focused on the shipping industry, the sector that is the cleanest by far.

Much to my surprise, ship-owning organisations seem to have been keeping very quiet on studies and regulations that are putting shipping under pressure daily.

The only voice that I recall recently being raised was that of the President of Greek Shipowners Association who said that other transport segments, which together generate 97% of transport emissions, should be the first to be cleaned-up.

Other than that, I don’t recall any of the ship-owner organisations defending the industry.

I appreciate INTERTANKO’s work on emissions and its call to switch to distillate fuel, but I believe that, in general, shipping needs to explain itself better. We, the bunker industry, the ones supplying the shipping industry, are regarded as "bad boys."

Interestingly, people who are distant from our realities, from the facts of our industry’s life, label us and their voices seem to be heard louder than ours. It is not an easy task to provide bunkers for the global fleet at some 3,000 ports, 24 hours, 365 days a year, in good weather and in bad; a service that comes while many of those who criticise us are nestled in cosy offices with warm tea and biscuits.

We are the ones sourcing large cargoes from distant corners, carrying it, leasing tanks, storing all grades, carrying all the unsecured commercial risk and price fluctuations. We are the ones testing it, heating it, blending it. We own or charter the bunker barges, managing them to supply, punctually, in the shortest possible time frames with highest possible pumping rates.

We are giving extended credits to buyers, most of the time on an unsecured basis.

I say that we, the independent bunker suppliers, supply the extended credit because in many parts of the industry the traditional 30-days credit is long gone. Already some suppliers, even oil giants have shortened payment terms to 21 days, some 15, and others even to 3-7 days.

We independent bunker suppliers buy oil from refineries, store it and supply it. We pay refineries cash in advance or are given very short terms of credit, often only a few days or 5-7 days at best. In order to provide customers on time we need product in store. This means we come to the office every day to sell the products we have fully paid for already.

Due to legislation, refineries are having to make adjustments and invest in new technologies to produce low sulphur products. In the short-term, the cost of this is calculated to be some $30 billion, who will pay for this?

We in the bunker industry use only a small percentage of the total oil consumed in the world every day. It doesn’t really make commercial sense to invest billions of dollars for just for a small percentage of output.

I believe we will all end up paying for the changes. The prices of products will shoot up, especially after 2015 when the 0.10% limits are applied in Emission Control Areas (ECAs), pushing prices of everything up from plates on your tables to the cars in your driveway.

As bunker suppliers, we are taking all these risks and do all that hard work for very little gain; we are not a rich industry.

If you look at some articles published on the Bunkerworld website, giving the financial results of bunker suppliers, including some large ones, you will see the profit margin for bunker suppliers or traders, and in general for bunker industry, this is less than 0.5%.

Some are selling bunkers valued at between $3-$4 billion per annum but are making only a few million dollars profit. A supplier selling 4 million metric tonnes of product only reported $1 million dollars profit, in other words 25 cents per metric tonne. I insist there is no other industry in the world can supply such high value commodity in such terms with such margins.

So, please, tell me if you know any “GOOD BOYS” giving such a service to any industry in the world. Must we keep being the BAD BOYS of the shipping industry?

*This text first appeared as the 'Last Word' column in the December 2011 issue of the Bunker Bulletin, the Bunkerworld magazine.


Mustafa Muhtaroglu,
9th April 2015 11:45 GMT

Comments on this Blog
Dave Kazmierski
9th April 2015
Who was the original author of this article?
Mustafa Muhtaroglu - Enerji Petrol Denizcilik ve Ticaret A.S (Energy Petrol)
9th April 2015
Me, same, Mustafa Muhtaro─člu (Energy Petrol Istanbul contacts can be found on www.energypetrol.com
Christakis Piitarides - Ajax Offshore Bunkering Services Ltd
14th April 2015
Well said Mustafa regarding new fuels, ultimately the consumer pays for everything and we are all consumers. As long as we are helping the environment its worth it right?

So are we getting value for money? The process of creating these new fuels may increase emissions of different types in order to produce something that decreases emissions. The net result may be zero effect on emissions. If this is the case then $30bn for a PR exercise doesn't sound like good value.

The bunker industry has a high risk low gain structure to it but there seems to be no shortage of newcomers and company expansions. Is this a bubble?
Mustafa Muhtaroglu - Enerji Petrol Denizcilik ve Ticaret A.S (Energy Petrol)
14th April 2015
Dear Chris, considering disapperance of OW, new comers and expansions seem to me normal. I dont thing there is a bubble so far I think number of suppliers and traders quite adequate for the size of total bunker market world wide however we might say there is excesive limits granted to final buyers which is due to low oil prices, when prices get higher we can see better balances. Thanks for your kind comments
Aditya Trehan - Scorpio Marine Management Pvt Ltd
6th May 2015
Very well said
agoetfme agoetfme
3rd September 2016
1
agoetfme agoetfme
3rd September 2016
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