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Monjasa’s Americas operations have flourished, and the company remains confident of further gains. ©Monjasa
Monjasa’s Americas operations have flourished, and the company remains confident of further gains. ©Monjasa

Survival of the Fittest

It’s not just weakened trade causing trouble for Panama’s bunker suppliers. Competition from outside the region offers a fresh threat - and an opportunity for others, John Rickards writes

Central America initially weathered both the IMO 2020 change and the growing pandemic well; initially there was no discernible impact on trade through the Panama Canal. However, with Covid–19 ballooning across the Americas, including Panama itself after the phased end of the country’s lock down in May, bunker sales have been showing distinct signs of weakness.

Volumes in March were steady, and rose year-on-year in April on the back of higher bunker calls (though down on March), and fell by just over 5% both year-on-year and month-by-month in May, the weakest demand seen since September last year. That was despite a rise in ship bunker calls. Then came a collapse in June of 37% compared to 2019, and of 22% compared to May. The number of ships bunkering was down 30%.

 

Extrapolating from the Panama Canal Authority’s statistics, two of the largest drivers of this loss are likely to have been the almost total shutdown of the cruise sector and the sharp drop in vehicle exports, meaning a reduction in ro-ro transits.

 

Not all of the fall in bunker sales is down to the economics of the pandemic or the loss of cruise or car carrier business, though. With Houston remaining relatively busy and US refiners keen to shift surplus product, it seems likely that cheaper bunkers from US ports may have undercut Panama’s suppliers.

 

Both Panama and the smaller Central American markets face considerable challenges in the future. The Canal has been under pressure from water shortages, and though this year has, at least, seen normal rainfall, climate change seems likely to put real restrictions on Canal operations in future. Another issue this year has been cheap fuel making alternate routes competitive. On the bunkering side, market fragmentation from a myriad of smaller suppliers and competition from other bunkering hubs, both established, like Houston, and putative like Jamaica are also challenges for Panama’s bunker industry.

 

The shape of the Panamanian bunker sector after emerging from the pandemic and its economic aftershocks should go some way to showing how ready it is to face the longer-term challenges lurking further down the road.

 

 

Panama has longer-term challenges than pandemic-led trade contraction. ©Jeremy Segrott/cc-by
Panama has longer-term challenges than pandemic-led trade contraction. ©Jeremy Segrott/cc-by

SEPARATE BLOCK

Monjasa sees shifts in demand

A key supplier in both North America and Panama, and beyond into South America, is Monjasa, which entered the year in a particularly strong position on the back of soaring profits and a sharp rise in volumes sold in the Americas. World Bunkering spoke to the company to get its view on the current situation.

 

WB: The Americas was Monjasa’s major growth area last year, with Panama a particularly key supply area, but now the Americas are the epicentre of the pandemic. What effects have you seen on the region’s bunker demand, and what operational challenges have you faced, from Covid–19?

 

Monjasa: Since the IMO 2020 change-over from HSFO to VLSFO, we have seen a significant change in the demand, particularly in Latin America. Where demand in Colombia experienced a strong increase, demand fell in Mexico, Ecuador, Peru and Chile. This was a mix of availability issues as well as price difference. Colombian VLSFO products became more competitive compared to surrounding ports, while VLSFO products in Mexico was priced higher than MGO in competing ports.

 

So, we have seen demand dropping in some ports while in increasing in others. For those ports that already experienced a drop due to the IMO 2020 effects, we expect an even further drop in demand due to Covid–19, but also due to overall low-season demand in Q2 and Q3.

 

Zooming in on Panama, total volume is affected largely by traffic to and from Americas and Asia. Consequently, we have seen a downward effect for a few months. June and July are however also the traditionally less busy months during the year, so demand is affected by both seasonality and Covid–19 factors.

 

With the introduction of the IMO 2020 rule, we faced the challenges of matching supply and demand and creating an operational capacity that would eventually fit the demand. As an example, HSFO demand has seen an increase over the last few months, and we are pleased to see that our fleet is well-balanced and able to adapt to such changes very rapidly. Furthermore, we have seen that our customers have very differing demands towards VLSFO products. Some are focused on higher viscosity while others are looking for lower TSP values. Our operational setup allows us to create customised solutions in both Houston and Panama, where we can load low sulphur products from several oil terminals and thereby find the fuel solutions that meet the challenges faced by our global customers.

 

Covid–19 has obviously affected the maritime industry in several ways. To us, a very specific situation in Panama involved the SIRE inspection onboard our vessels, which takes place every six months. This time we had our Technical Department in Panama preparing for the inspection on our 8,900-dwt tanker Accra. However, just as the inspector was supposed to perform the SIRE vetting, the country went into lockdown and our Technical Department ended up staying in Panama for three months until we could get permission to finally perform the vetting, which was in the end carried out successfully.

WB: The company has just added a new barge to its Houston operations. Is the expansion of capacity there a reflection of growth in demand, or Monjasa making its service more competitive? Do you have any other moves in the pipeline across this part of the company’s business?

 

Monjasa: We have spent a lot of energy understanding exactly what our customers are recognising as the largest challenges when taking bunkers in the Houston Greater Area and with this recent capacity expansion, we believe that we have found some solutions to these challenges. Overall, we are able to offer much more customised solutions through our ability to load products from five different oil terminals as well as creating increased flexibility and efficiency by adding a barge on time charter. We will be able to offer the product that our customers need, but also at a competitive price.

 

WB: Allowing for current uncertainties, what do you expect – or hope – to see in terms of Monjasa’s Americas business over the next few months?

 

Monjasa: We expect that Q3 will remain calmer than Q1 and Q2, only to see activity increase again in Q4. However even during Q3, we expect to see Monjasa’s services in especially North America to further increase.

WB: As an international supplier, has Monjasa’s presence in multiple different markets on numerous trading routes been a benefit in weathering the economic effects of the pandemic?

 

Monjasa: Everyone involved in global trade feels the effects of the activity slowdown which has spread from east to west and which is likely to continue impacting shippers and maritime service providers throughout 2020 and beyond. At Monjasa, we have not experienced material impacts of the pandemic so far. What we do see, however, is that overall market volumes are going down this summer and that competition remains tough across the board.

 

Monjasa’s global presence varies across less-crowded ports in Vietnam and Thailand to the world’s most busy shipping hubs. The fact that we are an agile organisation working together under one brand and covering different markets from multiple locations has surely been important to adjust to the shifting demands during this pandemic. As an example, we have recorded steady and even climbing fuel demand across the largest shipping hubs such as Singapore, while other markets have proven more vulnerable to the shifting trade patterns. This trend corresponds well with various maritime transport statistics suggesting that main shipping routes are less affected compared to regional sea transport.

 

Get in touch

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