After OW: “The trust is gone”
When global bunkering giant OW Bunker collapsed and two other bunkering companies went down shortly thereafter, it created big questions that the industry continues to grapple with: who has the right to demand payment for bunkers supplied to ships, and how can we protect ourselves if another company goes under?
These events have undermined trust between buyers and sellers of bunker fuel and haven’t done much good for the bunker industry, according to some of the biggest global players speaking at a Platts bunker conference in Rotterdam in late May.
The collapse of OW Bunker coincided with falling oil prices, increased competition, weaker margins, an uncertain regulatory landscape and increased financial exposure to create “a perfect storm” in the bunker industry, Jan Christensen, Global Head of Bunker Operations, Bomin Group told the conference.
After OW Bunker, Belgian bunker supplier Wiljo and then global bunker trading firm Bunkers International collapsed in quick succession. This inevitably makes you ask “who’s next?” as there is now widespread insecurity about the ”durability” of bunker supply companies, Henrik Zederkof, CEO of global bunker supplier and trader Dan-Bunkering said in his presentation.
Combined with the situation where many shipowners have been facing double or even triple claims for bunker payments in the aftermath of the OW and Bunkers International bankruptcies, the industry has been shaken to its core and people wonder who they can rely on to avoid this risk. “The trust is gone,” Zederkof told the conference.
The Res Cogitans ruling in the UK, which said shipowners had to pay OW or its assignee ING Bank, without protecting them from also facing suppliers’ claims, has created insecurities.
Christensen said the ship owner response has been to try to reduce counterparty risk, often by by-passing intermediaries to deal directly with the physical supplier. It has put heavier demands on all parties to build relationships and a good reputation.
Zederkof said it has raised questions about the suppliers’ business model, in particular with regards to how they are financing their credit lines. But he pointed out that bunker traders are providing an indispensable service to ship owners by granting credit, despite being in a very small margin business with great risks. Shipping would struggle if suppliers started asking for cash in advance.
The Res Cogitans ruling is of great interest to lawyers but of limited commercial interest, and has been given far too much media attention, according to a panel of legal experts at the Platts conference. They said the concept of maritime lien is not contractual but rather something that arises as a matter of law, and how that law is applied varies between countries. The many suppliers that have attempted to secure their outstanding payments for deliveries made on behalf of OW Bunker by linking their claim to a maritime lien, mostly unsuccessfully, to can certainly attest to that.
By Unni Einemo