World Bunkering > News > Winter 2009 > Singapore success

It is not often at a bunkering conference that you can step out of the conference hall, walk up a few steps and actually look out on ships taking fuel from barges. That was, however, the case at this year’s IBIA convention. The barges in question were working in Singapore’s Western Anchorage in clear view of the Rasa Sentosa Resort, the Convention venue where the conference hall was packed throughout the two-day event.

Looking back, IBIA 2009 feels like one of the very best Conventions the association has had so far – very well attended and with a programme that kept delegates’ attention throughout. It is ironic though that such a good event should take place in such bad times. While many of the vessels in the anchorages around Singapore were making short bunkering calls, a good number of the ships anchored off were clearly laid up. And delegates flying in were able to spot rafts of idle containerships in Malaysian waters.

Recovery on the cards?

Actually, part of the reason why IBIA 2009 worked so well was that it addressed the current issues and threw new light on them. The theme for the two days was “Positioning for Recovery”. It turned out that none of the speakers could offer much in the way of recovery, although several stressed the “silver lining” theory and the opportunities that exist amidst the gloom. There was another apparent contradiction. The message from around the globe was fairly consistent – trade and volumes were well down everywhere.

The estimated drop depended on location but a downturn of 20% appears to be typical, except that the host country’s bunker industry has bucked the trend and looks set to end this year with either much the same volume totals as 2008 or even slightly up. The guest of honour Choi Shing Kwok, permanent secretary at Singapore’s ministry of transport, was perhaps among the more optimistic of the speakers, detecting some market recovery and noting how some large companies were positioning themselves to benefit when the upturn occurs, especially in Asia. He was also cheered by an International Energy Agency forecast of a 1% increase in oil demand next year.

Perhaps unusually, the keynote speech by Nigel Gardiner, Drewry Shipping Consultants’ managing director, really did set the tone for the rest of the convention. He was asked to speak on “Economic Scorecard – What’s Going to Happen?”. His view was bleak: “Demand for ships will remain weak in 2010 and when recovery comes it is likely to be modest in most sectors. Changes in supply will dictate the tone in the freight markets and oversupply will persist in all sectors in 2010.

The net increases in supply in the next five years will be less than the figures suggested by scheduled deliveries from the current orderbook, given the problems in shipbuilding. Nevertheless, increases in supply will be sufficient to hold down freight rates. There have been calls for the industry (shipowners, shipbuilders and ship financiers) to act to avert a prolonged crisis. Although welcome, we doubt that it will happen. Over time markets will correct – but it will be a painful process.

CEOs view

The CEO panel

So there were few crumbs of comfort there. Members of the “CEO Panel” then followed up with their own perspectives. Marco Antonio Costa Tritto – Residuals & Feedstocks Manager, Petrobras, Singapore stressed how important bunkers had become to shipowners’ overall costs. In the seventies, bunkers accounted for about 13% of total operating costs, by the mid-eighties this had grown to 34% and now the figure is around 45%. One of the consequences of this, Tritto said, was that the market had become even more price driven. He also referred to increasing problems in obtaining suppliers’ credit. Lars Møller, OW Bunker Far East Singapore’s general manager of Asia said he thought container shipping would take a long time to recover. He also thought that the recent spike in the bulk trades might not last. He expected more consolidation with weaker companies dropping out.

He also predicted much more emphasis on counterparty risk management. Møller said that survival in the current situation required the right strategy “plus luck” but he did note that, around Asia, he did not hear the word “crisis” being used and said China was slowly picking up again. Tom Reilly CEO OceanConnect Inc commented that when shipping is sick, the bunker industry hurts too. He too emphasised the importance of managing counterparty risk and noted the increasing use of credit insurance, which few firms took out 10 years ago.

For DNV Petroleum Services’ managing director Tore Morten Wetterhus, the messages coming from the keynote speech and his fellow panellists were “frightening” and he too thought it would be three to five years before things were back to normal and even then bulk shipping would suffer for longer than that. So by the time the first coffee break had arrived delegates were in no doubt that even the pundits thought things were pretty awful, though perhaps the recovery was just starting, courtesy of China, and possibly India. By the end of the Convention a considerable quantity of ice-cold water had been poured over the Asian powerhouse theory, even over the concept of “back to normal”.

Market gloom remains

But for much of the rest of the day delegates were allowed to turn their attention away from economic issues to technical ones. And here the tone was much much more upbeat. There were a succession of workmanlike presentations which World Bunkering will cover in some detail in the Spring issue. Delegates were not allowed to completely escape the gloom and doom when, in the last session David Heard, Head of Energy (Asia) Macquarie Bank, underlined that both wet and dry markets still faced a difficult few years ahead. If that was not bad enough, the second day featured presentations from Jason Feer, Senior Vice President & General Manager, Asia Pacific for Argus Media, and Hong Kong Shipowners Association managing director Arthur Bowring, that effectively scotched ideas of an imminent China-based recovery. Feer said: “Things are not as bad as they were but they are still not back to normal.

Traditional pricing relationships are still out of alignment and indicate that ‘normal economics’ is still some way off. Some of the data we are seeing – particularly in China – does not fit into the overall picture very well.” While some of the data from China was contradictory, and some frankly unbelievable, a picture emerged of a country saving like mad and stocking up with commodities while they are cheap.

Bowring also pointed to a European Commission appraisal that ruled out any long-term return to the sort of demand growth from Western consumers that shipping, especially container shipping, has depended on during the good years. And he was scathing of the idea that China was already in recovery. He pointed out that the fact the country’s exports declined at the slowest rate in nine months, dropping 15.2% in September compared to a 23.4% fall the previous month, passed as good news in the current climate.

He quoted from the China Economic Review, which put total steel capacity in China this year at an estimated at 660 million tonnes against demand of 470 million tonnes. “What people thought was demand was either overstocking or speculative acquiring of inventory by traders,” CER had reported. IBIA chairman Chris Fisher also presided over much of the proceedings and noted towards the close that he had a feeling of deja vu. Earlier in his career he had supervised the lay-up of VLCCs close to Singapore and many aspects covered in presentations, even including one from APL on mixing water into fuel, echoed what was being said and done in the last major downturn.

Focus on education

IBIA Advanced Bunker Course

In fact Fisher allowed himself little time for contemplation while in Singapore. On Monday and Tuesday he delivered IBIA’s Advanced Bunkering Course which, with a notably good attendance, formed an integral part of what was in effect a five-day event. On Thursday morning Fisher returned to the education theme by presenting the results of a membership survey on whether IBIA should institute a professional bunker industry qualification. Fisher told delegates, that the response had been very much in favour of the proposal. He explained: “IBIA is not looking to move further into the training sector, but many of our members have shown an interest in an IBIA qualification.

The concept under consideration envisages IBIA preparing examination material for up to three levels – Basic, Advanced and Higher.” Feedback from delegates on issues was also supportive of the idea, which now needs developing in detail. Fisher explained: “IBIA would work with existing training establishments to ensure that the proper examination material subjects were included, to the level required, and would then recommend appropriate training programmes for students wishing to take the examinations. And IBIA would select an existing, professional third party to provide facilities on a global basis for students to sit the examinations under controlled conditions.”

The bright side

From parts of this report it might seem that a metaphorical dark cloud hung over the Convention in the form of the global economic situation. That was only true to a limited extent. An unprecedentedly large trade exhibition outside the conference hall was an indication that there is still plenty of optimism around in the bunker industry, and especially in Asia. There were though real clouds aplenty and some typical tropical downpours. A particularly heavy drenching coincided precisely with Friday’s early morning IBIA Golf Challenge, which was held at the Sentosa Golf Club, Tanjong course.

Luckily the event was held later in the day after an excellent buffet lunch at the Rasa Sentosa. The golf tournament was just one of the social events which, as always, made the convention the annual networking event for the bunker industry. IBIA 2009 was the first to be organised entirely in-house. It had taken a great deal of effort by a team including board members and IBIA’s staff; and the hard work clearly paid off. IBIA Events Manager Anne Chambers was able to fly back from Singapore knowing that she has a successful model to develop for IBIA 2010, to be held in Connecticut, US, next November.