Singapore’s bunkering industry remains buoyant-

Singapore continues to be the undisputed world leader in the bunkering industry. It accounts for about 30 per cent of the total world bunker fuel sales in terms of volume. The growing bunkering service has also led to the emergence of the Port of Singapore as a leading hub port. Other important ports with a significant share in the bunkering industry include Fujairah, Rotterdam, Hong Kong and Antwerp.

Overall scenario

Singapore’s bunkering market is estimated at over $25 billion. The sale of bunker fuel at the Port of Singapore increased from 36.4 million tonnes (mt) in 2009 to 42.7 mt in 2013, recording a compound annual growth rate (CAGR) of 4 per cent. Further, the number of bunker vessels also increased from 32,760 in 2009 to 38,614 in 2013. The growth in bunkering is largely because of the increase in the gross tonnage (GT) of vessels calling at the Port of Singapore. The tonnage increased from 851 million GT in 2009 to 1,058 million GT in 2013, even though the absolute number of vessels declined from 53,376 to 50,288 during the same period.  Currently, there are 62 licensed bunker suppliers at the Port of Singapore. The top five bunker suppliers, in terms of volume supplied, are BP Singapore Private Limited, Sentek Marine and Trading Private Limited, Transocean Oil Private Limited, SK Energy International Private Limited, and Shell Eastern Trading Private Limited. These are equipped to supply all types of bunker fuels, including marine diesel oil (MDO), marine gas oil (MGO), and marine fuel oil (MFO).

The price of bunker fuel is directly linked to the global crude oil price level. The recent downward spiral is primarily due to oversupply in the market and a slump in demand in Europe and China. In 2014, the price of bunker fuel began to decline from June and is expected to further decline during the first quarter of 2015. Since January 2014, the price of bunker fuel recorded an average decline of 20 per cent.

Chequered development

In an effort to ensure Singapore’s dominance in the bunkering business, the Maritime and Port Authority of Singapore (MPA) is gearing up to supply liquefied natural gas (LNG) to ships by 2020. It has already engaged companies to undertake pilot projects to figure out the operational protocols for LNG bunkering by 2017. The MPA, as part of its subsidy plan, has also agreed to finance $2 million per vessel for about six LNG-fuelled vessels. This initiative has been launched as part of a concerted effort towards lowering emission levels.

In another unrelated but positive initiative, the MPA has mandated the adoption of a mass flow metering (MFM) system for bunkering at the Port of Singapore. This is expected to enhance transparency in the bunkering process, as well as improve the operational efficiency and accuracy level in bunker volumes. During the trials, initiated by a working group of the MPA and SPRING Singapore, it has been recorded that the variance between the MFM reading and the terminal delivered figure was within the industry acceptable standard of 0.5 per cent. From January 1, 2015, installation of the MFM system will be mandatory for a bunker vessel to operate at the Port of Singapore.

In a recent development, Denmark-based OW Bunker collapsed in the wake of alleged financial irregularities at its Singapore trading unit – OW Bunker Far East (Singapore) Private Limited. The entire event has dented the confidence of financiers who have become cautious in lending to bunker suppliers. According to industry players, this could lead to a liquidity squeeze and pose a threat to smaller-scale local bunker suppliers who are dependent on trading houses. However, the MPA is of the view that the local market is unlikely to be affected in a big way with this development as there are over 60 bunker suppliers in Singapore, and OW Bunker accounted for less than 3 per cent of total sales during 2013.

Challenges

Singapore’s bunkering industry is not untouched by issues. The primary challenge is the declining profit margin on account of increasing operating expenses involving wages, and repair and maintenance. This is further accentuated at a time when charter rates are either stagnating or decreasing. The rising wage level is largely due to shortage of qualified officers and technical staff, including shore superintendents.

In the current scenario, it is also difficult for Singapore-based bunker owners and operators to arrange finance for new vessels. The cloud of uncertainty developing due to OW Bunker’s collapse has added to the challenges faced by Singapore’s bunkering industry. Financial institutions are expected to be extra cautious while funding the acquisition of new bunker vessels.

Conclusion

One of the biggest reasons for Singapore’s unshakeable leadership position in the bunkering industry is the kind of support that the MPA lends to stakeholders. The MPA has continuously improved processes and introduced efficient technology and methods to keep Singapore’s bunkering industry highly competitive. Two of the initiatives undertaken by the MPA in the past one year – the introduction of MFM and the move towards creating the infrastructure to supply LNG as bunker fuel – will ensure that Singapore’s position remains unchallenged in powering the shipping world.