World Bunkering > News > Summer 2011 > Global round-up

Africa

In another sign of a buoyant West African bunker market, Global bunker supplier and trader OW Bunker says that it plans to deploy two newbuildings to further strengthen its operations in the region.

OW Bunker says that it was one of the first suppliers to seize the opportunities of the growing market, and is “looking to consolidate its leadership position within the region”. Current supplies in the region will be supported by OW Bunker’s global network, with limited availability until the new build vessels are brought into service. The company reports that it saw a significant increase in volumes in the region following the escalation of piracy incidents in the Gulf of Aden and off the Horn of Africa, with many shipoperators taking the decision to re-route vessels and secure reliable and safe bunkering alternatives.

Americas

US-based Alexander & Baldwin says that the recent surge in global fuel prices “related to the unprecedented unrest in the Middle East and North Africa is negatively impacting” the results of its container shipping line subsidiary Matson Navigation Company, which was expected to post an operating loss for the first quarter of 2011. The company said in a statement: “We expect to recoup a large percentage of fuel cost increases through surcharge mechanisms in 2011; however, an environment of continually escalating fuel costs could impair timely recovery of these costs and further impact financial results.”

A&B president and chief executive officer Stanley Kuriyama said: “Increased fuel prices are having a disproportionate effect on transportation companies as fuel is an unavoidable and significant component of operating costs. Matson’s ability to employ fuel price adjustment mechanisms to limit the impact of price fluctuations on its first quarter earnings has been outpaced by the steep acceleration in fuel prices.”

He added: “We are carefully monitoring the impact of fuel, as well as the ongoing freight-rate environment in China, where spot-market container rates are relatively soft. We expect to have more clarity on China rates with the commencement of the new annual contract cycle in May and the beginning of the peak season this summer. In addition, we are paying close attention to the potential impacts of the recent tragic events in Japan on the Hawaii and Mainland economies, and how that may affect our businesses. There was no damage to A&B’s assets following the Pacific tsunami triggered by the earthquake. An update of our full-year outlook, including an assessment of the impact of the factors described above, will be provided on our first quarter earnings call.”

Asia

Japan adjusts following March catastrophes

Japan’s bunker industry suffered along with the rest of the maritime infrastructure when the March 11 8.9 magnitude earthquake and 10m tsunami hit north-eastern Japan. The port of Sendai in particular was severely damaged. Bunkering operations in Tokyo Bay were stopped right after the earthquake but resumed to a limited extent. A month on, the bunker industry was functioning more or less normally but with both avails and demand at lower than usual levels, reflecting both a reduction in shipping traffic and reduced output of bunker fuel from those refineries that were functioning. Cosmo Oil’s Ichihara refinery in Chiba prefecture, which caught fire as a result of the earthquake, was still out of action in mid-April as were JX Nippon Oil & Energy’s Negishi, Sendai and Kashima plants.

However, the lack of bunker fuel in eastern Japan was being offset by increased production at refineries on Japan’s west coast. To some extent bunker activity in Tokyo Bay was being impacted by container ships avoiding the regions because of radiation fears due to the damage to the Fukushima nuclear power station.

DNVPS goes green

DNV Petroleum Services (DNVPS) is to use international courier company DHL Express’s DHL GOGREEN Carbon Neutral shipping services across DNVPS’ global markets, including its specialist laboratories in Singapore, Oslo, Rotterdam, Houston and Fujairah. The multi-million dollar contract encompasses the DHL GOGREEN Carbon Neutral service and covers the outbound transport of DNVPS’ sampling equipment and the inbound regional transportation of bunker oil samples for testing. For a surcharge, DHL will measure and offset carbon emissions for international air express shipments and provide DNVPS with a certification stating the total amount of CO2 offset on their behalf each year.

DNVPS says it is the first auxiliary service provider in the global maritime industry to sign up for the DHL GOGREEN service. DHL GOGREEN calculates carbon emissions generated from the transporting of each shipment and offsets emissions through carbon management projects such as a wind park in China or a hydro plant in Brazil.

Weak margins hit Chemoil

Singapore Stock Exchange-listed global bunker supplier Chemoil made a full-year net loss in 2010 of US$9.5 million, due mainly, the company says, to first quarter losses and “the slow pace of margin recovery throughout the year”.

Chemoil has a strong final quarter to 2010 with a profit before tax of $3.7 million but one-time write-offs, including $5.1million for deferred tax assets of a subsidiary, resulted in a net loss of $1.8 million for the quarter. The company says its gross contribution per metric ton (GCMT) in Q4 was US$ 6.70.

Chemoil’s full year sales volumes rose by 3% to 15.6 million tonnes for FY2010. Chemoil’s Executive Chairman, Mr Mike Bandy, said: “In the fourth quarter of 2010, we produced our best quarterly operating results for the year as the fruits of our operational improvements and cost cutting efforts began to take shape. However, we also decided to take conservative actions by making one-time write-offs which will better position the Chemoil Group going forward financially as the marine fuel margins begin to recover.”

He added that direct bunker sales grew 6% and ex-wharf sales, which are ultimately sold to the shipping market, grew 60%. “However,” he said, “our business continued to be exposed to weak wholesale-retail margin spreads, although signs of improvement have been showing during the latter part of 2010, as reflected in our Q4 results.”

Ceylon Bunkering Corporation set to re-enter market

Sri Lanka’s state-owned Ceylon Bunkering Corporation (CPC) is set to re-enter the bunkering business soon, initially at Colombo. Asian Tribune reports that Secretary to the Ministry of Petroleum Industries, Titus Jayawardene, has ordered CPC to re-enter the bunker market at the “earliest possible instance”. The report says that it is likely that CPC will revive its defunct subsidiary, Ceypetco Marine Services (Pvt) Ltd incorporated in 2007, to carry out deliveries.

There are eight licensed bunkering companies in Sri Lanka but the market is currently dominated by three players, Lanka Marine Services; Indian Oil Corporation’s Sri Lankan subsidiary Lanka IOC; and Lanka Maritime Services, all with about the same market shares last year, although the Asian Tribune report puts Lanka IOC ahead. CPC’s move will intensify competition at Colombo but the big issue in the Sri Lankan bunkering scene now is the SLPA’s determination to be the sole bunker supplier at the massive new port at Hambantota in the south-east corner of the island. The first phase of the 15-year project was completed last year. The US$450 million project, funded by China, is expected to be completed in four phases and will take 15 years for the completion of the entire project. In addition to the port project, China is also funding a $1 billion new refinery at Hambantota.

From the start, Hambantota, now formally known as Magampura Mahinda Rajapaksa Port, has been seen as a bunkering centre, located much closer to the shipping lanes than Colombo. However, the SLPA has also made it clear from an early stage that it wants to be the monopoly bunker supplier. At the opening of the port last year, SLPA chairman Priyath Wickrama told a press briefing that bunkering would be the one area not open to foreign investors at the new port of Hambantota near the country’s southern tip. He told Reuters: “We will handle oil bunkering. We don’t want to give it outside. But bulk cargo handling, storage facility, warehouses, transhipment, and all others are open for investments,” This January Mr Wickrama said: “We’re hoping to start bunkering by May this year. We’re going to buy four self-propelled barges to start this business.” It is understood that the SLPA has taken this stance as it sees the bunker business as an important way of earning the cash required to repay the Chinese loans.

Unsurprisingly, the Sri Lankan bunker companies are not happy about this and want a share of the action. Lanka Business Online (LBO) reports that the firms argue that increased competition and efficiency will expand the market. Sri Lanka Shipping as already submitted a proposal to the SLPA to sell ship fuel in Hambantota when it invited investments for industries in the new port, according to LBO.

Europe

Bunker costs hit DFDS

Major European ferry operator DFDS has reported increased revenue and EBITDA for 2010 and also a significant cut in fuel consumption but this was heavily outweighed by increasing bunker costs. Total earnings grew 33.5% to Dkr9.86 billion (US$1.9 billion), against Dkr6.55 billion in 2009. EBITDA was up 36.8% to Dkr1.27 billion. A company statement said: “The increase reflects the improvement in market conditions, the acquisition of Norfolkline in July 2010 and the extensive work done over the past couple of years to adapt operations and make them more effective.”

In its annual report the Danish-based company says that average bunker consumption per crossing was reduced by 6% in 2010 through a number of efficiency measures. However total fuel cost grew by 30% compared to 2009 due to the rising oil price and appreciation of the US dollar. It noted: “An organisational and operational restructuring process implemented better practices on board in 2010 to improve productivity and revenues. Benefits from this ongoing process are envisaged to be recorded in 2011.”

On its website the company says that DFDS has been undertaking a series of technical and operational initiatives to reduce fuel consumption. Technical initiatives include, for example, improved engine efficiency, the recycling of excess heat and better management of onboard energy consumption. The operational aspect involves changing departure and arrival times in order to reduce the ships’ service speed as much as possible. The long-term goal is to move the fleet towards bigger ships. Concentrating freight volumes on larger but fewer vessels will also reduce energy consumption and emissions per transported unit.

IMO

IMO’s subcommittee on Bulk Liquids and Gases (BLG 15) decided at its February meeting not to proceed on work on proposals that would impose mandatory marine fuel standards. However, it seems likely that there will be an attempt to revive the issue at July’s Marine Environment Protection Committee meeting.

Norway and Intertanko wanted bunkers to be pre-tested on a range of parameters and for a ban on on-barge blending to be imposed. Their paper argued that a lack of mandated minimum quality requirements on the fuel supplied to vessels causes preventable risk to the safety of shipping, the environment and the health of seafarers. They suggested adopting the quality provisions detailed in ISO 8217 as part of the requirements of Annex VI.

The International Bunker Industry Association (IBIA) raised a number of practical issues but, together with BIMCO, put forward a detailed paper proposing that a correspondence group be established to select those parameters and elements of fuel quality which have the greatest impact on safety, environmental pollution and health, and can be readily quantified and assayed at the delivery location. Currently, the quality of bunkers is regulated by national authorities but in practice, almost all marine fuel ordered and supplied worldwide is contracted to meet the requirements of one of the grades detailed in ISO 8217:2005 and increasingly by its recent replacement, ISO 8217:2010.

IBIA and Bimco were concerned that the application of legislation to what has previously been a commercial contractual issue could cause genuine problems in the logistical supply chain by imposing a disproportionate increase in the regulatory and operational burden on ports and ships relative to the anticipated benefits of the proposed legislation. In the end, however, a majority of states at BLG decided there was no need to proceed on the Norwegian/Intertanko proposals.

BFC’s new barge

Russian-based Baltic Fuel Company (BFC) has brought into service a new 5,000 dwt double hull tanker. The 106 metre loa Captain Ponikarovsky meets the requirements of MARPOL Annex VI to MARPOL.

Classed with the Russian Maritime Register of Shipping the tanker will be used for taking petroleum products export cargoes from the St Petersburg to European ports, for supplying bunkers at St Petersburg, Primorsk, Ust-Luga and to fishing vessels in Russian offshore waters.

The company’s CEO, Stanislav Korneev, says: “Transportation of oil products, including exports, is one of the key activities of our company. We plan to develop the business through expanding our own logistics solutions. From June this year we start shipment of oil products from refineries in central Russia by our own oil barges through the country’s inland waterways. That will allow us to reach the guaranteed delivery volumes. With the commissioning of the Captain Ponikarovsky we plan to expand the geographical scope of deliveries outside the Russian Federation.”

BFC runs a bunkering fleet of more than 25 vessels around Russia’s North-West coasts.