World Bunkering > News > Autumn 2010 > ARA region heads for market recovery

In common with most of the shipping industry, 2009 was not a good year for the bunker industry in the ARA region. While Rotterdam retained its position as the second busiest bunkering port, overall bunker sales fell by 6% over the previous year from almost 13 to 12.2 million tonnes. This still reflects a moderate success for the ARA region bunker sector under the circumstances, given that cargo throughput was down by 8.5% over the same period. The number of bunker deliveries fell slightly, from 21,864 to 20,748. A Port of Rotterdam spokesman said that the decline was “due to the crisis”.

Marcus Buts, a bunker trader with Lukoil Benelux, said that the company’s market fell by some 25-30% from the start of the crisis. However, he added: “We do see a small recovery of the market lately.”

The drop in volumes was particularly acute in Rotterdam itself, says Michael Schaap, sales manager at Klaas de Boer, a mid-sized bunker supplier that specialises in the ARA region. “We had seen a sharp drop in bunker demand in the ARA region, but especially in Rotterdam and therefore have focused even more on the Amsterdam port region, where we saw a decline in volumes but much less of a drop than in Rotterdam.”

By contrast, Oilchart, a specialist small quantity supplier, says that is suffered no decline in bunker demand at all, with volumes remaining constant at 80,000 tonnes a month, reinforcing the impression that it was largely the container trades and their suppliers in the ARA region that suffered.

Low sulphur volumes rise

Despite the crisis, volumes of gasoil bunkered in Rotterdam rose last year by about 20%, from 252,414 tonnes to 302,607 tonnes. Sales rose considerably at the end of 2009 ahead of the 0.1% sulphur limit for ocean-going vessels which berth for more than two hours, imposed by the European Union, which came into force on 1 January 2010. “MDO enquiries are now practically non-existent,” says Sonja Verstijlen, managing director at Oilchart. “The demand for MGO has rasied considerably as from January 2010.”

The introduction of tighter ECA regulations seems to have had little overall effect on the ARA region market. “We expect to see more 1% demand compared to the 1.5% market as vessels have to switch earlier from HS to LS to be ECA compliant upon entry,” says Schaap. “There will be enough supply available to meet demand but it could well be that the premium over HS will increase. The market has the ability to balance supply and demand, so I have no worries about this.”

“For the time being there are no problems with the availability of 1% fuel in the ARA region,” emphasises Sonja Versteijlen. “The switch over from 1.5% to 1% sulphur was done in a smooth way, although in the beginning there were here and there some quality problems.” As a result, quality testing in the ARA region has been expanded to include tests for TSE, aluminium, silicon, calcium, zinc, styrene, DCPD and Indene, in addition to existing tests for viscosity, water and sulphur levels, she says,

According to Lukoil’s Marco Buts: “There have been no real changes to the ARA region bunker demand, as 1.5% sulphur demand has been replaced by the 1%. Up to now and until the year end, we foresee no problems for supply to meet the demand.”

Despite the change to lower sulphur fuels, there has been no corresponding change in demand in the ARA region for lubricants suitable for use with these fuels, says Schaap. However, seagoing vessels leaving the ECA can cope with the less lubricating characteristics of the oil for a certain amount of time. He suspects that companies who are operating permanently in ECA waters have contacted the suppliers directly, rather than going through resellers, as this option is more expensive.

Other changes in demand in the ARA region continue to develop: “The shift towards higher viscosity fuels is still ongoing. Vessels that used to burn 180 are often adjusted to cope with 380 cSt. Also, older vessels are being scrapped at the moment so we see more demand for higher viscosity fuels [as newer vessels replace them],” Schaap says. Likewise, Lukoil’s Marco Buts says that requests for 180 cSt requests have gone down. “It’s now mainly HS 380 and LS 1% 380 + MGO 0.1%.”

“During the last years there has been a switch from 180 cSt to 380 cSt,” says Versteijlen. “Also, viscosities below 180 cSt are rather an exception”

ARA region Market consolidation

The ARA region appears to have been going through a period of consolidation recently, with regional players being taken over by international firms. At the beginning of the year, Aegean made headlines by purchasing Verbeke Bunkering, which had a substantial share of the Rotterdam market, delivering some 3.5 million tonnes of fuel in 2009. Verbeke now operates as a wholly owned subsidiary of Aegean.

“The accretive acquisition of Verbeke represents our largest acquisition to date, positioning Aegean well to significantly increase future sales volumes and strengthen the company’s global brand recognition. Based on its extensive operating history and strong reputation for high-quality service, Verbeke has built a leading market position in the ARA region. We intend to capitalise in the favourable growth prospects of the world’s second largest bunkering market and meet the demand for our comprehensive marine fuel services,” said Nikolas Tavlarios, president of Aegean, announcing the acquisition. “By joining Aegean’s premier global network, we expect to expand our opportunities for long-term growth and strengthen our leading position in our core markets.”

Another move towards market consolidation took place at the beginning of June, when South Africa-based Grindrod announced that it was acquiring the Rotterdam-based Associated Bunker Oil Contractors (ABC) group. As with the Aegean acquisition, ABC’s existing senior management will continue in their management roles. The group is a well established physical supplier of marine bunker fuels, operating four bunker tankers in the ARA region. The ABC group is linked to the Vinotra Pool, a scheduler of bunker tanker delivery services in the ARA region ports.

Laurence Stuart-Hill, executive director of Grindrod Limited, said “The acquisition of ABC in Europe expands the recently established bunker barge business in South Africa. The expansion of our bunker barge business into Europe supports our strategy of expansion into international and niche market sectors”.

The two components of ABC, namely barge operations and physical supply will be separately managed by the shipping (in respect of barge operations) and trading (in respect of physical supply) divisions of the Grindrod Group.

Hans Boer, shareholder and managing director of ABC said: “The acquisition by Grindrod Limited of the ABC group of companies will provide a major benefit to our customer base. They bring a level of expertise and experience that will complement and enhance our core services in both the trading and physical supply disciplines. I am confident that the acquisition will allow us to further improve our already excellent quality of service to our customers and grow our market share”.

International players move in to the ARA region

One of the most significant changes in the long term may be the entry of Chinese company Brightoil into the ARA region market. The company announced early in 2010 that it intended to enter the market in the first half of the year, establishing a trading office in Rotterdam in April. According to Willian Chia, executive director at Brightoil, physical operations began during May using chartered barges. The company sells all grades of fuel oil except MGO. Information on sales volumes was not available at time of going to press.

Lukoil Benelux has been consolidating its own operations in the ARA region, closing its Amsterdam office at the beginning of August and centralising all commercial and operational matters to the Rotterdam office. The company is also working on obtaining a full bunker licence in order to be able to offer all products in the port of Antwerp, says Marco Buts. Lukoil will continue to operate its existing fleet of six barges under long-term timecharters.

Another international company to expand its presence in the ARA region was Petrobras, which opened an office in Rotterdam in February. Petrobras is an important player in the LSFO market, selling 850,000 tonnes a year, much of which is supplied to the bunker market. The Port of Rotterdam Authority estimates sales of low-sulphur bunkers at 15-20% of the total bunker sales; between 2 and 2.5 million tonnes a year.

Petrobras imports around 600,000 tonnes of product with a sulphur percentage of 0.8. This is blended with higher sulphur fuel up to the levels permitted by ECA requirements. Since May last year, Petrobras has also been selling locally-purchased HSFO; to be able to offer its clients a complete package, the company has been selling high-sulphur fuel oil since May.