World Bunkering >Articles > Risk management > New realities

Carsten Ladekjaer

From its office in Dubai, International Bunkering Middle East DMCC supplies bunkers and lubricants world-wide. Managing director Carsten Ladekjaer readily agrees to share his thoughts on the new realities following the recent economic meltdown.

WB: Do you think the following is an accurate assessment of the current market situation: “Since many ships are currently sailing with only part cargo, a comparison of prices between ports has become more prevalent. Where previously, bunkers were often taken to facilitate each leg of a voyage and afford maximum cargo capacity, vessels with less than capacity cargo are bunkering to capacity where prices are lower?”

CL: I believe this assumption is certainly correct and in line with reality. Since the shipoperators may no longer be able to pick and chose between most suitable cargoes for their individual ships and since the freight rates have declined, it is only a natural reaction to optimise on other parameters, and bunkers happen to be one of the major running costs of a ship. Luckily this opens more doors for the professional bunker companies who are able to guide and assist their clients accordingly.

How has your attitude towards extending credit changed since the credit crunch took hold in 2008?

To tell you the truth we have had to adjust to the new situation just like everybody else. I would be lying if I told you that everything is “as before”. Before, a shipoperator could make a profit in nearly every corner of any shipping segment ... This changed rapidly and caught a lot of companies and people on the wrong foot. Since then the rules of the game have changed and the industry is now geared (you might say literally) in a very different way. In a way, the credit issue has changed from being a mere formality into becoming the prime issue in many cases.

What additional steps are you taking to secure or insure your risks?

The changes can be found in the details. We’re actually doing the same things that we’ve always done, ie trying to be as thorough as possible in our credit assessment. The world crisis has forced us to be even better than before in this field. Actually, this excercise can be quite healthy for a company to go through. So far we have come through without any major scratches but still we’re trying to be humble in the situation and take on a conservative approach. After all, a good deal only has one happy ending; it’s called ‘payment’!

Has the profile of your typical customer changed since 2008 and, if so, how?

Overall I would say no. We haven’t blacklisted any segments or changed focus towards specific ones. We still believe that each potential or existing client should be assessed individually. Of course we have turned down business that we might have been tempted to go for earlier when fundamentals were better, but overall our typical customer profile did not change noticeably.

What has been the reaction of physical suppliers towards you as a trading company, against which maritime liens are not enforceable?

Actually, we now have a stronger bond with our suppliers than ever before. There’s no doubt in my mind that the role of the bunker trading companies is more vital to the whole industry than ever and that our counterparties are aware of this. This actually goes both ways in the trade, ie also towards our clients. The current economic situation has made it clear to everyone that we are needed. In our specific case we might actually come out of this crisis stronger than before. Being part of a financially very strong group and being a financially sound company ourself, our counterparties rightfully feel safe in choosing International Bunkering Middle East DMCC during the current turmoil.

Has there been a noticeable change in customer lifting patterns in the past year?

Some projects have been cancelled and some liner services have either been scaled down or even shut down entirely. A number of ships have been scrapped and then again a large number are still coming out. So you do tend see more of these final or initial bunker-lifts here and there. Then of course you have the laid-up ships and the slow steaming to consider. My personal estimate would be that the demand has fallen around 20% regionally and probably also world-wide since September 2008. However, this is far from a static picture and we are also beginning to see some signs of demand increasing, at least periodically.

Are you seeing customers applying different parameters to the purchase of their bunkers since 2008?

Our clients still need proper quality on time and with the right terms. I do not see any changes there. It’s not like clients have begun to compromise on quality or have become less demanding about getting the products on time. Why would they? The clients seem more appreciative of the services we are providing than before. They do not take us for granted. I’m not saying they were before, but at least it’s clearer now. As a result the dialogue between us and our clients has become even better. It is like there is a mutual understanding of partnership in making things work.

Do you have any other comments on the current market and the prospects for traders?

The shipping industry worldwide still has a lot of serious challenges ahead. The lack of a balance between supply and demand for ships currently makes it hard for a large number of shipowners to make a profit. However, on a more positive note, the world will continue to need shipping and I believe in the continuing globalisation of the world economy. Due to the complexity of financing, sourcing reliable products, and the importance of true value-added service and guidance I have no doubt that bunker traders will continue to play an important role in keeping the ships of the world moving safely well into the future.