Masters of Bunker Credit
14th August 2012 14:00 GMT

There is no universal agreement on this, but global sales of bunker fuel are estimated to be around 350 million tonnes per annum.

It is worth pausing for a moment to estimate the value of the market.

If, for simplicity's sake, we assume an 80/20 split between IFO 380 and distillates, and if we base average prices on the Bunkerworld Index for 2012 (data so far, shows BW380 at $688.28 per metric tonne and distillate product at $ 1002.11), expenditure on bunkers is running close to $262,865,000,000 per year.

This is a very rough estimate but we do know that a substantial proportion of those bunker deliveries are sold on “unsecured credit terms”. The amount of money in play is probably larger than the overdraft facilities offered by the banks to the shipping industry. This highlights how integral and important bunker credit is to the shipping industry and what an important factor it is in shipping companies' survival.

While ships' Masters are fighting against mother nature to keep their ships safe at sea a much smaller number of shore-based 'Masters' are struggling to navigate this 'ocean of credit'.

As OECD figures suggest, the single largest bunker market is Europe with 31% of the global sales. It is hardly surprising, therefore, that Europe should be home to some of the world's leading bunker credit expertise (alongside other regional  'knowledge hubs' including Singapore and North America).

Adam Dupre, who died in June, was one of the world's most experienced maritime credit analysts.

With twenty-seven years in the sector, he had accumulated layer upon layer of knowledge. He had witnessed a number of shipping cycles and could recognise the dynamic of the market in way few other market observers could match.

I think it would be fair to describe Adam as a 'Credit Management Intellectual'.

In his book (to date, the only one written on the subject) ‘An Introduction to Bunker Credit Risk’, bunker credit management is defined as “an approach that depends more on knowledge and good judgement than on the application of mathematical formulae to publicly (or even privately) available data”.

I hope I will be forgiven for for using this Blog to add my own tribute to Adam's philosophy.

Adam dedicated an important part of his career to teaching, training and mentoring maritime credit talent. I am very fortunate to have had Adam as my master and I will always cherish the title he gave to me: “The Last Apprentice”.

His first advice when I started my credit reporting career was “Feel it” and his last advice was “Be yourself”. As Managing Analyst (Europe, Middle East and Africa) at Ocean Intelligence, this is advice I pass on to analysts joining our team.

Adam always went for the holistic approach, looking at the whole picture, integrated against a background of experience and knowledge.

With Stuart Kenner he was one of the founders of the credit reporting industry. He once observed: “Any fool can succeed in a rising market but it takes good management to steer through a falling one and both bunkers and shipping are cyclical businesses.”

Adam was never a seafarer, rather he was a maritime professor, analysing turbulent markets and training fresh talent.

Paul Millar (Head of Global Credit for the Bomin Group) was one of those whose early career was influenced by Adam.

Writing in the Bunker Bulletin (January/February 2012 issue), Millar appeared undaunted by the challenges of his job. "If you know your customer and understand the markets where they operate, what is there to be frightened of?” he asked.

In a sense, he represented Adam's philosophy in action. Taking a 'holistic' and interconnected view, it is possible to acquire a deep knowledge. Companies like Bomin appeared able to “feel” the Sanko bankruptcy and collapse in the face of little advance warning. The fact that Bomin will not be amongst Sanko's list of creditors can be attributed to the application of credit management.

Adam believed that caring with your “full self” was essential to the art of credit management. I say “art” because credit management is not something that can be undertaken without “feeling”.

When Adam spoke of 'feeling' the market, he was, in fact, identifying what insight guided by knowledge, experience and zeal, can supply.

Jonathan McIlroy, Credit Manager of Peninsula Petroleum, is another of those who were influenced by Adam. "It takes an exceptional person to make a good credit manager, who can integrate the knowledge, wisdom, sense and balance into the appraisal and then sprinkle it with the salt of experience," he said. "The resulting taste is generally correct."

Chrysostomos Papavassiliou (Managing Director of Island Oil Limited), recognised for putting Cyprus on the bunkering map, wrote in the May/June 2012 issue of the Bunker Bulletin that physical suppliers, in an effort to maintain their sales volumes, were offering increasingly competitive prices.

He pointed out that, faced with lower profit margins and heightened risk, physical suppliers had limited room for error. Credit risk management and effective credit control were increasingly important.

Papavassiliou concluded that companies with the ability to adapt and manoeuvre in changing economic situations were best equipped to survive.

Mustafa Muhtaroglu, chairman and chief executive of the Istanbul based supplier Energy Petrol AS, has echoed those views.

Speaking to Bunkerworld he said that bunker suppliers were taking significant risks and for little gain.

Their comments were evidence of the challenges of navigating the stormy ocean of maritime credit.

The survival of bunker suppliers (physicals and/or traders) is absolutely connected with the ability of their Credit Managers to swiftly navigate these risky waters.

It is here that the Credit Managers, the masters of their art, play a key but often unsung role in helping make and save wealth in this high risk risk- low margin business.

Can Besev,
14th August 2012 14:00 GMT

Comments on this Blog
Jason Silber
16th August 2012
As one of my first MRC rabbis would have said, "wise words, mate!"
Virendra Mishra
21st August 2012
I have just finished reading this blog. You have very correctly brought out and highlightened the role of Credit Managers in the Bunker Industry. And yes, you have given a very well deserved tribute to Mr.Adam Dupre, who was one of the world's most experienced maritime credit analysts. Look forward to reading your next blog.
Antonis Xiros - BMS United Bunkers Ltd
24th August 2012
The essence of being a trader and / or physical always include risks and cannot avoid taking any, as they will not allow us to grow and expand, but we should make them as calculated risks as possible.. Being involved in credit management is helpful, as you learn to expect and be prepared for the worse case scenario and to have a far more critical and longterm approach etc.. Jenny Tsagli, Marketing manager, BMS Bunkers
Mustafa Muhtaroglu - Enerji Petrol Denizcilik ve Ticaret A.S (Energy Petrol)
24th August 2012
İt is another apportunity to remember and thank to dear friend Adam Dupre, great man, master of credits.. Thanks Can, very good artical, looking forward to next one already. The last apprentice is on way to be Master soon. Musfafa Muhtarogu, Energy Petrol İstanbul
Leo Domingo
26th August 2012
It's my first day to visit this site due to the requirement of fulfilling an RFQ. It's indeed very informative for the ones who haven't been into this field of maritime analytical thinking for Bunker Credits. I am interested to learn further so I am hoping, anyone will be supportive as well to provide me some of the beginner / starter kit towards knowledge power. I will also try my best to look for Adam Durpe books if any.
Leo Domingo
26th August 2012
Mustafa Muhtaroglu - Enerji Petrol Denizcilik ve Ticaret A.S (Energy Petrol)
7th September 2012
After all, is it changing time for the industry ?
LIke all other credit granting institues, is it time for bunker suppliers & traders to ask for real securities for setting credit lines ?
Is it end of "open credit" ?

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