INTERVIEW: Bunker company KPI OceanConnect sees sales grow despite 2020 challenges: CEO

Singapore — Global bunker company KPI OceanConnect has so far seen higher sales volumes year on year as it strengthens its core businesses --trading and brokering-- in the major bunkering hubs such as Singapore and continues to expand in other segments such as risk management, on-line procurement and lubricants, company CEO Soren Holl told S&P Global Platts.

The company's growth plans comes even though the industry faces numerous challenges in 2020 and industry estimates point to a 9%-15% on year drop in global bunker demand this year, Holl said in an interview on Oct. 2 ahead of the 21st edition of the Singapore International Bunkering Conference and Exhibition, or SIBCON, event.

KPI OceanConnect, which operates across 15 locations globally, plans to continue to focus on back-to-back trading, risk management, brokering as well as fuel procurement strategies, Holl said. The company also wants to increase its presence in the on-line procurement business, Holl said.

"COVID-19 definitely has had an impact on bunker demand. The cruise industry for one has been severely impacted. So that volume has left the market, triggering a kind of chain reaction [in terms of counterparty risks]," Holl said.

Still, bunker sales are starting to pick up again in some ports, with Singapore being an example of a port with robust marine fuel sales, Holl said. "So, we are getting back to some new kind of normal."

In August, bunker fuel sales in Singapore, the world's largest bunkering port, inched up 0.27% on the month and jumped 13.6% on the year to 4.17 million mt, preliminary estimates from the Maritime and Port Authority of Singapore on Sept. 14 showed.

Challenges in 2020

The International Maritime Organization's global low sulfur mandate, which was implemented from Jan. 1, 2020 brought huge challenges for the industry.

There were concerns about fuel quality, adequate availability of low sulfur fuel oils and the price of such fuels, Holl said. Credit availability and heightened counterparty risks were also among some of the other concerns as the industry transitioned to the rule, he added.

There are still some IMO 2020 related challenges, but they are less than those in the past, Holl said.

"We prepared very well for the IMO 2020 transition. We ensured that our staff was aware of the different products, held a close dialogue with our clients and sought the right financing," Holl said.

As early as November 2019, the company had said that it was delivering more IMO 2020 compliant fuels compared to HSFO.

Meanwhile, the IMO 2020 rule isn't the only hurdle that the year 2020 unleashed.

Crude oil prices started to slide in February and March, not only because of COVID-19, which brought about an unprecedented level of demand destruction, but also due to disagreements within OPEC+ about how much oil they should produce, Holl said.

These factors have created a huge level of uncertainty and insecurity in the market, Holl said, with banks are pulling out of commodity markets due to the decrease in prices of commodities as well as issues faced by some suppliers, citing oil trader Hin Leong's collapse as an example.

"We expect there will be a further credit crunch as liquidity is pulled out of the market," Holl said. "So, it is important to know your counterparty, ensure that they have the right processes in place and the right funding to sustain themselves in the industry."

Consolidation Wave

KPI OceanConnect, formed by the merger of KPI Bridge Oil and OceanConnect Marine this year, has completed the integration of the two businesses successfully.

"We took a first step in this consolidation wave," Holl said, adding that the industry is ripe for further consolidation.

Due to tough market conditions, it's difficult for smaller players to build a strong platform, broaden their coverage and meet expectations of their business partners as far as disputes resolution and compliance to processes is concerned, Holl said.

"So far we have enough on our table...But we still have appetite for more [acquisitions] if an opportunity presents," Holl added.