What are the key challenges in bunkering?


Falling bunker prices, lower margins, available credit, the credit-worthiness of ship operators and increased regulations are just some of the issues bunker suppliers face.

For ship operators lower bunker prices are great news but new regulations, fuel quantity and quality issues, rock bottom freight rates, ECA compliance and the uncertainty around the levels of fines for non-compliance, all add to the everyday challenge of delivering a profit.

Faced with these market conditions, what are the big issues facing your peers?

We asked a number of questions around bunkering challenges and we suspect many of the results will resonate with you:

Bunkering Challenges

question What is the biggest challenge facing the bunkering industry?

Price volatility and credit risk
become crucial

bunkering-marine-fuel-loudspeaker What respondents say

The two areas raising the greatest concern were: Bunker price volatility - 46%, Credit risk – 40%

Bunker prices have fallen sharply over the last year. This is a double-edged sword. Margins are squeezed for suppliers, yet the cost of operations for shipping is reduced. However the volatility of oil prices impacts both parties making it difficult for both sides to accurately manage their costs of operation.

For bunkering companies getting costs wrong could be the difference between a profit and loss on a deal. For shipping, volatility makes managing costs and maximizing margins more challenging.
In the case of credit risk, this is very much a concern for suppliers, who have to carry the burden of cost right through the supply chain. With margins tight the cost and availability of credit and the credit-worthiness of customers can have a significant impact on business. The collapse of OW Bunker highlights the risks, shows how vulnerable the industry can be and goes some way to explain why marine fuel suppliers rated getting credit as a challenge for their business.

bunkering-marine-fuel-solutions What are the options

When it comes to oil price volatility many operators look at hedging is an option to mitigate risk. Done successfully this takes out some of the uncertainty surrounding fuel prices and can help minimize potential losses.
When it comes to managing credit risk it is important for suppliers to have in place robust financial management processes and systems. Systems that have specialist credit management functionality give bunker suppliers a way to efficiently process invoices, handle credit terms, produce cash flow forecasts and manage costs. Combine these activities with due diligence and credit-worthiness checks of potential customers and credit risks can be managed.

BUNKER SUPPLIER/BUYER RELATIONSHIP

question What is the biggest issue with your partner in the bunkering industry?

Fuel price
transparency

bunkering-marine-fuel-loudspeaker What respondents say

From our discussions with bunkering and ship operators three areas of concern were raised when talking about partnerships: Price - 43%, Trust - 39%, Partner communications - 18%.

All three issues are closely linked and point to the need for better transparency within the industry.

From our 1:1 research with both ship operators and suppliers we found that trust and concern over fuel prices were lower where there was a long term buyer/supplier relationship. In these circumstances when disputes occurred they tended to be resolved quickly.

bunkering-marine-fuel-solutions What are the options

This is always going to be a difficult issue to tackle. With the launch of a number fuel trading platforms there are more tools available to help both parties build a better picture of current fuel prices.

Using fuel procurement software also gives operators the option to go out to tender and get multiple quotes from different suppliers. Again offering the option to compare and select the best deal. These systems also offer the option to monitor supplier performance helping to further identify more reputable suppliers.

BUNKER/SUPPLIER COMMUNICATON

question How should bunker negotiations and communications be handled?

Communicating via
the phone only
accounts for
6% of activities

bunkering-marine-fuel-loudspeaker What respondents say

With the growth in technology the industry is no longer just relying on the traditional means of communication when handling negotiations and this is borne out by our survey results showing that communicating via the phone only accounts for 6% of activities.

Companies are now using the full complement of platforms from email, through to integrated systems to handle bunker negotiations.

bunkering-marine-fuel-solutions What are the options

This move away from traditional forms of communications is being driven by the need for businesses to record and store all bunker transactions. Electronic communications and complementary integrated software platforms provide operators with the tools need to accurately record and monitor transactions/ activities. This is providing operators with the confidence to do business knowing that if there are issues with quotes, pricing, quantity ordered etc they have everything stored and easily accessible should disputes arise.

OPERATIONAL CHALLENGES

question What is the biggest operational challenge in bunkering a vessel?

Trust in pricing an issue for
50% of respondents

bunkering-marine-fuel-loudspeaker What respondents say

When asked about the biggest operational challenge in bunkering a vessel, trust in pricing information reflecting the market was a concern for over 50% of respondents.

This once again reinforces a need from the market to have greater transparency regarding pricing. As mentioned earlier solid supplier/ buyer relationships and the recent launch of a number of bunkering comparison platforms may go some way to improving this issue going forward. We will certainly continue to monitor this during future webinars and on-going telemarketing research.
Something that also rated highly as an operational challenge by 27% of respondents was slow and fragmented internal systems.

bunkering-marine-fuel-solutions What are the options

Fragmented systems makes decision making more complex as management struggles to access the data needed to understand what is going on in the business. System integration and making data more accessible through better analysis and reporting enables operators to get the maximum amount of benefit from their IT investments.

There are a number of software providers on the market who can provide the integration and specialist software needed to ensure ship operators can easily access the data needed, across multiple locations in order to make faster, more effective business decisions.

POST PURCHASE CHALLENGES

question What is the biggest problem with post purchase operations?

Record > Manage > Monitor

bunkering-marine-fuel-loudspeaker What respondents say

When it comes to buying fuel the post purchase operation can be just as important as the actual purchase as operators can encounter a number of issues after fuel is loaded onto the ship. When we asked operators – what is the biggest problem with post purchase operations – three areas stood out:

Quality mismatch – 38%, Delivery issues – 31%, Quality disputes – 23%

bunkering-marine-fuel-solutions What are the options

What these findings highlight is the need to have systems in place that:

  • Record and process fuel quality reports from labs and manage quality reconciliation.
  • Manage deliveries and reconcile quantities ordered with quantity delivered.
  • Monitor and manage claims.

By implementing the above processes and associated software - operators have access to information that enables them to monitor performance and identify potential issues as they arise.

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