World Bunkering > News > Autumn 2010 > Recession? What recession?

Last year it seemed open to question whether Singapore port could continue to buck the global trend of falling volumes. The 2009 total volumes figure of 36.4 million tonnes, a 4.2% increase on 2009, seemed almost too good to last. The figures for the first half of 2010, however, seem to indicate Singapore port is in for another surprisingly buoyant year in terms of bunkers supplied, with some 20 million tonnes delivered and insiders predicting that the 40 million tonnes mark will be passed this year.

Container recovery drives boom

A Maritime and Port Authority (MPA) spokesperson said that the “amazing” bunker figures largely reflected a recovery of the container trades although supplies to bulker carriers had also picked up significantly at Singapore port.

The renewed confidence in the container trades, which form the mainstay of Singapore port business, is reflected by a decision by Neptune Orient Lines (NOL) to embark on an ambitious $1.2 billion newbuilding programme for its container shipping arm APL.

It has ordered 10 8,400 TEU vessels from South Korea-based Daewoo Shipbuilding & Marine Engineering for delivery in 2013 and 2014. It has also signed a letter of intent for two 10,700 TEU vessels. NOL said it is investing in new vessels to meet future growth needs and to replace vessels with charter agreements that will expire in the next few years.

Return to ‘normal’?

Dan-Bunkering’s manager in Singapore, Kenni Goldenbeck, has also seen signs of an upswing. He says: “We have seen some positive trends in the market lately – not only in Singapore, but in South East Asia in general. The turnaround for vessels at Singapore port anchorage has increased and the movement of tonnage in many segments has seemed to improve since the shipping crisis. Whether we are out of the crisis yet, is very difficult to say. I don’t expect us to go back to the ‘good old days’ – that period is history. Now we are probably closer to ‘normal’ levels than earlier. Both owners, charterers, and suppliers shall consider these levels as ‘normal’ and adjust and act accordingly to maneuver their business to a safe future.”

So there is an optimistic feel in the Singapore market, but it is tempered with caution. Mr Goldenbeck comments: “The main challenge is still the overall shipping industry. Will the freight rates improve to better levels or go down? In which direction will the oil prices go? All that can naturally lead to some shipping companies going down as worst case scenarios, which can result in big financial losses to local suppliers and traders as well. Credit risk management should still be top priority and to say no is sometimes better than taking any chances. We are all here to keep the ball rolling, but using common sense and taking some care is still the way to go for all of us.”

He believes the potential implementation of flow meters is going to be interesting. He said that while the idea is good, it could be difficult persuading local suppliers to accept it. He added: “MPA will, as of now, not make it mandatory for suppliers, hence I foresee that only suppliers who have clients demanding flow meters will use it. The remaining will continue as per normal practice. If they do decide to make it mandatory, then I expect bunker prices in Singapore port to go up, and will Singapore then lose market share to other countries? This is yet to be seen. We are all interested in making Singapore port the best bunkering port worldwide and any improvements should be welcomed by all parties involved.”

Meeting the need for training

While volumes may be increasing, so too are costs and pressures on margins. Singapore port remains a fiercely competitive market but players are having to continuously invest in modern equipment and facing increasing difficulty in funding newbuilding projects. At the same time the costs of employing bunker barge crews is also rising, partly because officers in the local fleet are aware they may be able to earn higher salaries sailing on the international deep-sea merchant fleet.

An exodus of experienced bunker officers a couple of years ago, combined with the continued growth of the local bunker market, threw the spotlight on the need for training. This has been taken up by IBIA and the first three graduates of the association’s new Professional Training Programme for Bunker Cargo Officers (BCO) completed their course and were awarded their certificates of competency in June.

The bunker sector faces a potential crew shortage

The course, which was jointly developed by IBIA’s Asia Branch, Wavelink Maritime International (WMI) and bunker industry stakeholders in consultation with the MPA, aims to raise professionalism through recognised industry qualifications.

IBIA Asia Branch Executive Committee chairman Simon Neo emphasised the importance of the initiative, saying: “IBIA is delighted that it has paved the way for standards of certification in the bunker industry and we hope to develop this programme for other industry professionals in the future. The sky’s the limit”.

IBIA’s Asia regional manager Chong Kam Wah said that the initial course had been highly successful and that registration for the next course was in hand. He said: “This programme will certainly continue and the Asia Branch plans to roll it out in phases to other bunker ports in the region. We estimate that there are at least 200 potential candidates for the course from the Singapore bunker fleet and regionally at least twice that number.”

Mr Chong said that there were no plans to make the course mandatory in the near future, but in the longer term the IBIA Singapore branch is working with the MPA to put it on a “continual refresher education basis.”

Government support

While the BCO is a major step forward it is also an example of the increased investment required by barge fleet operators. The Singapore government is very much aware of the cost pressures on the maritime sector and earlier this year announced an extension of a port dues concession brought in to help tide the shipping industry through the economic downturn and which also benefits the bunker tanker fleet. A 20% Singapore port dues concession for harbour craft engaged in commercial activities within Singapore port waters was extended for another six months, from 1 April to 30 September this year. The measure was initially brought in on 1 April last year.

Singapore Shipping Association president, and ceo of container line PIL, SS Teo, welcomed the decision but called for the concession to be extended further. He said: “Whilst we are very appreciative of the incentives offered to the shipping industry, more needs to be done. The six-month extension on the Singapore port dues concession will be a great relief to the shipping industry, but we hope that the government bears in mind that, despite tentative signs of recovery and a marginal increase in cargo throughput, international shipping is not really out of its doldrums yet. In particular, the threat of over-capacity arising from new buildings coming on-line over the next two years will serve to dampen freight levels.”

He continued: “As such, we hope that the Singapore port authority will be able to extend the Singapore port dues concessions past the 30 September 2010 deadline. Any proposed cost increase that could have a detrimental effect on the shipping recovery should be withheld for at least another year. ”

New players

Despite increasing costs, Singapore port continues to attract new players while existing ones are expanding their operations. Among recent entrants are a number of Chinese companies. At the time of writing Sinopec affiliate, Southernpec, was in the process of becoming a licensed bunker supplier and had already brought in two barges.

PetroChina bought the 12th largest supplier, Singapore Petroleum, last year, while Brightoil has massively and controversially expanded its Singapore-based trading operation. A number of BP staff moved to Brightoil, triggering a legal dispute.

BP, however, has emphasised it is still fully engaged in the Singapore market, and has filled most of the vacated positions on its bunker trading team internally. In July, BP Singapore president Pek Hak Bin, presenting the annual BP Statistical Review report, said that the annual revenue of its Singapore port operations remained robust at $40 billion. He said: “We are committed to growing our business from here.”

Meanwhile among existing players in expansion mode, KPI Bridge Oil has moved into bigger and more centrally located premises in order to accommodate plans to further expand the trading teams over the coming months. KPI Bridge Oil group ceo Jan Obel said: “We are very pleased with the consistent strong performance and growth of the Singapore office and we’re continuing to look for more experienced traders to join the established teams. I believe that the Asian market offers great opportunities for growth and for the company to expand further in 2010 and beyond.”

United Bunkering & Trading (Asia) has also moved to new, larger premises as part of a move, it says, to intensify its business in the Asia Pacific Region. A UBT spokesperson said that the company had “enjoyed tremendous growth since its incorporation in 2001”. She added: “UBT offers a wide range of bunker services, from physical supply capabilities in Hong Kong, to agency services in the Greater China region, together with our extensive network of reputable business partners.”