News / Sky-high bunker prices force suppliers to boost credit for major liners

Liner operators with substantial fleets are receiving larger credit lines from their marine fuel suppliers as bunker prices have gone up by at least 80% from before the US-Iran conflict broke out on 28 February, and more than doubling in certain ports.

According to the Baltic Exchange, on 2 February, very-low sulphur fuel oil (VLSFO) prices averaged $469 per tonne in Singapore, $491 per tonne in Zhoushan, and $429 in Rotterdam

Yesterday, mean VLSFO prices were $1,025 per tonne in Singapore, $1,076 per tonne in Zhoushan and $784 per tonne in Rotterdam.

Amid the US/Israel-Iran conflict, Iran has shut the Strait of Hormuz that is a conduit for 20% of the world’s oil supply. Consequently, supplies of marine fuel have fallen, sending prices rocketing.

Following the IMO 2020 regulation (which capped sulphur content at 0.5% for ships without scrubbers), VLSFO became the most commonly used marine fuel, in order to meet environmental compliance.

While shipping lines declined to discuss the amount of credit their bunker suppliers are offering, citing confidentiality, suppliers in Singapore, South Korea and Hong Kong told The Loadstar that they have raised their customers’ credit lines.

A megamax container ship (19,000-24,000 teu) typically requires between 1,000-3,000 tonnes of bunker fuel per call. For a full Asia-Europe round-trip, which can span over 40 days, fuel requirements can exceed 6,000 tonnes. This means that for mainline operators with a large fleet, like MSC, they could require a credit line exceeding $100m, from $80m previously.

A bunker trader told The Loadstar: “The major liner operators tend to buy from oil majors, physical suppliers and large fuel trading groups, and they’re asking for higher credit lines. They have large fleets and have better bargaining power with their bunker suppliers, which tend to support these shipping lines.”

A major physical supplier in Singapore told The Loadstar that it has hiked the credit limits of the liner operators among its clients.

This source said: “We want to support our customers where possible and obviously, with bunker prices sky-high now, our clients need more credit. However, credit approval isn’t a one-size-fits-all approach. We assess our customers’ credit lines based on their fuel consumption and payment punctuality.”

Typically, bunker suppliers and traders offer customers 30-day payment terms, although some customers, such as Evergreen Marine Corporation, have 45-day payment terms.

COSCO Shipping Lines is understood to procure marine fuels, through a Singapore-registered affiliate, COSCO Shipping (Singapore) Petroleum, which consolidates the entire COSCO group’s bunker purchases. This practice bolsters the COSCO group’s bargaining power and simplifies invoicing.

Another supplier, based in Hong Kong, said that it tries to offer as much credit as possible, after consulting with its bank and credit insurer.

This source said: “Banks are naturally more cautious, so if our credit insurer is all right, we can offer credit in excess of what our banks give us.”

Sellers of marine gasoil (MGO), which is most commonly used in emission control areas or within ports, told The Loadstar that they have kept existing credit lines unchanged.

One source explained: “Ship operators buy only a small quantity of MGO so there’s no need for a drastic hike in their current credit lines.”