‘Back to Basics First’ is the latest Blog from the Chairman of the MFA, Robert Thompson.
The industry is in a very transformative period with arguably more changes than ever before all in one go which impact both the buyers of fuel and the suppliers and traders
- The ETS being expanded to cover ships
- Fuel EU maritime
- IMO net zero framework
- The myriads of renewable fuels and debates, legislation and regulation surrounding them
- More MFMs being implemented in key ports
- More bunker licencing
- Some big technical / product issues in certain areas of the world
- Expanded digitalisation of products and services
And I could go on….
All of this creates additional work, learning, understanding, communicating for all stakeholders and this is a lot to absorb when it’s often a struggle to maintain your core business and try to make a profit. Few of these, if any, contribute to the pot in the short term. They if anything create extra cost to absorb whilst at the same time diverting the attention of management and staff away from the core reasons they exist. I am sure I speak for every CEO in saying this often feels like a mountain to climb.
So, let’s get back to basics and discuss the things which really matter the most for our mere existence in the short term, and the issues which I believe pose the most short-term threat.
- How difficult the market has been this year for bunker suppliers and traders. It is widely forecast by many to be worse in 2026 with a combination of low oil prices, low volatility, depress global economic conditions and a more challenging maritime environment for owners and charterers
- As we get to the close, we are seeing more issues leading to this conclusion, in terms of slower payments, payment defaults, bankruptcies and the like. Things are very dangerous out there for those needing to provide credit for marine fuel and the most concerning matter I am hearing from my peers is that of security for the credit provided.
For many decades there has been the assumption that a creditor supplying fuel to ships can rely on a strong maritime lien for those necessary services. This is the underlying perceived security which the industry and the practice of providing credit have been built upon, especially for bunker traders. By and large historically it has been a very effective security / deterrent, albeit everyone is aware that some jurisdictions are ‘kinder’ to creditors in this respect that others. However, this has changed in the last year or two with more and more cases where arrests are no longer possible for charterers (especially voyage charterers) debt, and less and less jurisdictions allowing this practice. Some say it is the consequence of the many cases played out over the years post the OW Bunker collapse. Whatever the case it is a seismic shift in the premise underpinning this part of the industry.
Imagine if tomorrow banks were told that if a homeowner defaults on their mortgage, you can no longer repossess the property as security. What would be the reaction? It’s obvious, virtually all banks would withdraw from all but the safest and most guaranteed loans….this is where the bunker industry finds itself when considering bunker credit. Not to mention the trade credit insurers who are largely underwriting these transactions. I will also add that nowadays most banks require the seller to have trade credit insurance to be able to provide financing for their business. It is therefore potentially a house of cards, as if the security is deemed to be inadequate the potential domino effect could have a major impact on the shipping industry which relies quite heavily in many cases on the credit provided for fuel to help fund its operations….and we are talking of a quantum in the region of $120-150b at today’s prices, not easy to replace by any stretch of imagination.
I would like to table this matter as the key matter for suppliers and sellers of fuel to address in 2026. It is in every stakeholder’s interest for this to be dealt with as a credit crunch does not play out well for the buyers. It leads to increased prices, shortened terms and lower limits, and severely hampers the cashflow of the operators. Ultimately the bad debt must be recovered from somewhere. Let’s be fair, the vast majority of buyers honour their debts. But with wafer thin margins in this industry only one of two defaults in a year can easily wipe out any profit; then the good performers start to be impacted by the adverse performance of the very few. Something will have to give, and the industry needs to urgently address this matter.
