Suppliers' credit risk up on rising bunker prices

Rising bunker prices have increased the credit risks faced by bunker suppliers, a maritime credit reporting expert has said.

Suppliers are facing higher credit risk on higher bunker prices

''Bunker prices may have serious implications for the maritime sector,'' said Adam Dupre, managing director of Ocean Intelligence Pte. Ltd.

He was speaking at the 6th annual Marine Money Asia Week 2007 conference held in Singapore this week.

Dupre said ship operators had tendency to go  'supplier shopping' when buying bunkers,  maximising their credit spread across several suppliers.

''No single supplier has the handle on exposure to all buyers at one time,'' Dupre warned. ''This needs professional bunker credit manager and the services of professional credit reporting companies.''

He stressed the importance to bunker suppliers of ''knowing their clients'' and obtaining ''accurate counter-party intelligence''.

Bunker buyers, on the other hand, should as far as possible develop a ''culture of transparency'' about their finances.

He said bunker fuel easily made up 50% of a ship's operating expenses.

Dupre used the example of the shipping firm APL to show the impact of bunker purchasing.

He said it bought on average three million metric tonnes (mt) of bunkers per year. ''If we take Singapore 380 centistoke (cst) price in 1998, APL would need $180 million for bunker costs. Now, the company will need $1.2 billion – a seven fold increase.''

The rise in bunker prices has pushed bunker buying decisions up the hierarchy to senior levels, said Dupre.

''The price of bunker fuel has become a major consideration for buyers now,'' he told the audience.

Dupre said operators should come to terms with a long-term scenario of rising bunker costs and should stop trying to offset costs by adjusting bunker surcharges.

Fuel conservation mechanisms, such as hull-coating or even towing kites, should be taken into consideration as a strategy to reduce bunker bills, he added.