Conference takeaways: 8th Istanbul Bunker Conference
The 8th Istanbul Bunker Conference took place on 10-12 May, and as in previous years attracted numerous delegates, high level government and industry support, quality speakers and hosted truly special social events.
Ali Deniz Eraydin, Chairman of the Turkish Bunker Association, gave a warm welcome to international guests and thanked them for joining this bi-annual event despite difficult times in Turkey. Of the 16 speakers, 12 were from outside Turkey, and five were from IBIA. The chairman of IBIA, Robin Meech, was conference chairman and also did a presentation. IBIA’s Chief Executive Officer, Justin Murphy, and IBIA’s IMO Representative Unni Einemo, also presented alongside IBIA board member Nigel Draffin and maritime arbitrator Trevor Harrison, who is the company secretary for IBIA.
In total, some 250 people attended the conference and the social events, which included a boat trip and historical sightseeing with a private guided tour in the beautiful Hagia Sophia.
The conference helped raise awareness about the global 0.50% sulphur cap and associated challenges, risk management, and the need for education and training for the times ahead.
Here are some of the main takeaways:
- Some 50,000 ships go through the Turkish straits every year at present. Istanbul bunkers up to 35,000 of them and aims to bunker 50,000 ships in 2020. Bunker sales in Turkey grew 12% in 2016, and 15% the year before.
- The demand for 0.50% fuel to meet the global sulphur limit in 2020 is about 20 times bigger than the demand increase for 0.10% sulphur fuels associated with the new ECA limit in 2015, and so far the 0.50%sulphur blended fuels we expect have not yet been tested commercially.
- Shipping is facing unprecedented uncertainty and risk ahead of 2020 against a background of weak rates, low growth in trade and no imminent relief to ship oversupply.
- We have a 2020 conundrum – scrubber installation capacity is at an all-time high but money is sparse and there is no benefit to ships for early installation (unless they spend a lot of time in ECAs)
- The price differential between low sulphur fuel and HSFO in the early phases of 2020 may be as much as $400 for a while, or maybe $240 compared to $170 at present which will make abatement very attractive with a quick payback. Despite that, the initial volume of scrubbed fuel will be low but could double, triple or even quadruple from 2020 to 2025.
- Scrubber economics is not viable for ships that are 15 years or older, but for newer and large ships payback can be less than two years.
- Effective enforcement of the global cap is in doubt; it is one of the areas the IMO will need to work on. Some think compliance will be high, perhaps driven by whistleblowers on the ships themselves.
- High competition and squeezed margins in the bunker supply business has led to very aggressive trading. Some traders are extending credit to companies that are a default risk, but it is worth it if the margins are better. Credit insures are cautious after OW/Hanjin and similar collapses, which has led to increased premiums.
- The biggest problem in 2020 won’t be shortage of sulphur limit compliance options or funds to comply with regulations, but the lack of seafarers with the right training. There is already a deficit and the shortfall is set to get worse, especially of officers such as engineers and superintendents. Operations will be more challenging in 2020 and we already have a competence gap.
- Ships may become maybe 50% more energy efficient by 2030 using all available operational and technical measures, but vendors of efficiency solutions are often exaggerating claims. Measurements of effectiveness are open to uncertainty which suggest there is a need for an evaluation platform, a “database of real success” should be established.
- Will there ever be standard T&C conditions in the bunker industry? In some respects this is already happening because contracts are being copied creating a certain standardisation all by itself. Contract terms need to cover a range of areas; commercial, technical, legal, regulatory. Perhaps the way forward is to create standard clauses rather than standards terms.
- The bunker industry powers global trade creates jobs and contributes to charity. It is time to focus on the positives, not just the negatives and move toward a future where bunker industry participants are seen as positive role models in society and trusted partners, in turn improving customer and employee loyalty.
There will be a fuller report from the conference in the autumn issue of IBIA’s official magazine, World Bunkering, which will also be distributed at IBIA’s annual convention in Singapore.