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Heidmar Focused on ‘Plan of Action’ to Respond to 2020 Bunker Challenges
July 5, 2018
Mark Smith, who in May joined Heidmar UK as Director of Bunkering to lead the company’s 2020 compliance and fuel purchasing strategy, tells Bunkerspot that ‘the way the oil market is moving and changing all the time, we need to make sure that we are making the right decisions at every turn.’
Heidmar operates around 90 tankers across five pools: Seawolf (VLCC), Blue Fin (Suezmax), Sigma (Aframax/LR2), Star (Panamax/LR1) and Marlin (Handy).
Last November, James Pippard moved from Teekay Tankers to take up the role of CEO at Heidmar, and Mark Smith, who led Teekay Shipping’s fleet bunkering operations, subsequently followed Pippard to establish and build the new Heidmar Bunkering Services platform. As previously reported, this entity is looking to firm up the company’s bunker/scenario planning strategies to be ready for the introduction of the 0.50% global sulphur cap in 18 months’ time.
A few weeks into his new role, Smith says that all compliance and purchasing options are on the table for close scrutiny as Heidmar musters for the impact of 2020.
‘The idea is to become even more sophisticated on the bunkering side, he says. ‘Heidmar has always had a solid bunker team, but with 2020 on the horizon and the global impact that the sulphur regulations will have on the shipping market, preparation is key.
‘We are doing our best to put a plan of action in place so that we can do that moving ahead.’
So how does Smith see such a plan taking shape?
‘In terms of compliance, with 2020 in mind, we have got to think about credit lines – both extending and renewing – because with fuel prices on the rise, they will tighten significantly, so we have to make sure our relationships are in place,’ he emphasises.
‘We also want to explore the potential for fuel contracts, and possibly hedging. Heidmar is the largest pooling company from a tanker perspective; we have a lot of owners that we represent and work on behalf of, so we have to make sure that we are doing our best to represent them accordingly.’
At the moment, nothing appears to have been ruled in – or out – in terms of Heidmar’s 2020 strategy, but Smith is well aware that the dynamics of fuel demand and supply are set to experience a radical shift come the sulphur cap deadline.
In terms of fuel grade availability, he is confident that gasoil will be widely available but, he suggests, there could be teething problems with the new 0.5% sulphur blends, in the short term at least.
The availability and location of tank storage will be key post-2020, and heavy fuel oil, whose future survival in the marine fuel supply chain is entirely dependent on scrubber demand, may lose out to other fuel grades in terms of tank space in some global ports, says Smith.
To date, there has not been a wide scale shift to scrubbers by vessels operating within Heidmar’s pools. ‘With doubts over HFO availability, there are so many unknowns on the value of scrubbers post-2020,’ he says.
‘We visit all major ports – Singapore, Fujairah, Houston, Gibraltar, etc. – and we have a presence in these ports every week,’ he explains. ‘However, much of our work is tramping, so we don’t always have fixed ports with known avails of fuel, which makes it very difficult.
‘Buying on contract – we will look at this option, for sure,’ he says. ‘And hedging – yes, again we will look at it but,’ he cautions, ‘we must approach any decision with forethought and with the necessary due diligence.’
Whatever the ‘unknowns’ will be come 2020 – and most market commentators believe there will be many – the shipping sector is bracing itself for a rocky ride in terms of the direction of fuel prices. Smith agrees: ‘There will be extreme price volatility in Q4 2019/Q1 2020, and a big spike in distillate prices.
While I don’t see a huge differential [between grades] lasting for ever, we need to watch carefully how it is handled and how it begins to settle down.’
By Lesley Bankes-Hughes
Bunkerspot – 4 July 2018