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West Coast ports have been hit by sliding box traffic and vessel cancellations. ©Roy Luck/cc-by
West Coast ports have been hit by sliding box traffic and vessel cancellations. ©Roy Luck/cc-by

Grim up North

Softening trade and a chaotic US pandemic response have hurt North American economics, and even fierce fuel sales competition in Houston doesn’t stop the overall picture looking pretty gloomy right now, according to John Rickards

The US bunker sector has had to weather sharp falls in east-west international shipping as Covid–19 battered economies in Asia and Europe, the sweep of the pandemic across the US itself and the disastrously botched Federal response that followed, and the oil glut of late spring. It’s no surprise that demand took a battering – and as, at the time of writing, the pandemic rages across the South, probably will for some time to come.

However, it’s not a wholly bleak picture, and with one eye on the inevitable, eventual recovery, some suppliers are gently expanding their services. Houston-based GCC Bunkers announced in June that it was adding offshore supply in the Gulf of Mexico to its existing port offering via chartered tanker. Monjasa added another barge to its Houston operation in July, giving the company a total maximum monthly volume of around 40,000 mt in the port. And, looking even further ahead, Pilot LNG has filed regulatory applications to build an LNG bunkering terminal on Pelican Island in Galveston, the first such facility in the region. If approved – a decision is expected in 2021 – the terminal, including a new liquefaction plant, is slated to become operational in 2024.

 

“The proposed Galveston LNG Bunker Port would provide the necessary infrastructure to supply the growing market for LNG marine fuel,” CEO Jonathan Cook said. The Galveston-Houston-Texas City port complex is one of the main ports serving the Gulf’s cruise industry, a sector leaning relatively heavily into gas bunkering.

 

It is perhaps worth noting that Houston/Galveston has been one of the few ports around the US to have maintained reasonably steady traffic levels despite the challenges of the current year. There has also been a little consolidation in Canada, with CANDEN Marine Fuel Services being absorbed by Glander International Bunkering to become its Montreal subsidiary and GIB’s ninth office and its second in North America. The decision, GIB said, was strategically aimed at strengthening the company’s global presence.

Glander’s CEO Carsten Ladekjær said: “Glander International Bunkering has remained a strong business since its inception focusing on helping clients worldwide. With this expansion of our brand, we aim to combine our global leadership with CANDEN’s local expertise. Our move into Canada is exciting and will complement our North American bunkering operations and services effectively.”

 

Elza Adamyan, ex-CANDEN, now GIB, added: “Moving into Glander International Bunkering will position us even stronger to meet demands and provide even higher levels of service for our clients. We are thrilled to integrate with Glander International Bunkering’s global teams of experts and long-term vision”.

 

GIB had enjoyed a strong year, with pre-tax profits up 75%, and at the time of releasing its annual report in June seemed happy with the shape of business going into the spring…

“This was an occasion where every bunkering company and its employees had to face the test of industry change and demonstrate their expertise and level of preparedness. Our people leaned in, and it is very satisfying to see the results of all the hard work,” said Ladekjær.

… and sanguine but calm about the post-pandemic state of the industry.

 

“I would not be surprised if the coming year leads to more consolidation in the industry, with strong companies emerging even stronger,” Ladekjær added. “With our sound financial foundation and strong organisation, we look forward to this with humility, but also optimism. We are prepared to face future challenges and remain ready to seize opportunities.”

 

However, such moves are somewhat thin on the ground, and just weathering the pandemic and the economic fallout to follow it is occupying the industry’s planning more than anything else, particularly in regions exposed especially sharply to the fortunes of individual shipping sectors.

Cruise operators are under a no-sail order in US waters due to run until the end of September – though member lines of the Cruise Lines International Association had all cancelled operations until September anyway. Carnival Corporation posted a second quarter loss of US$2.4bn in June, Covid–19 having put the company’s entire business effectively on hold from early March. Carnival is aiming to accelerate the intended sale of six of its current ships originally slated to go over the next few years as well as delaying delivery of several more to shore up the books, while vessel sailings even when they resume will be curtailed. Royal Caribbean is under similar pressure.

 

The cruise industry is a niche market for the North American bunker sector, concentrated in relatively few ports such as Miami, but vital in those locations. Vancouver, another such port, has reportedly seen a collapse in demand since May.

 

Miami-based World Fuel Services saw first quarter marine profits surge 68% on the back of higher margins for VLSFO, but was far more cautious about the ongoing impact of Covid–19 on the economy and working climate as a whole, warning “we have since seen a sharp decline in demand and related sales” for Q2, which would “more significantly” impact the company’s bottom line.

 

“We posted solid results in the first quarter of the year despite the impact of the pandemic in the latter part of the quarter,” said WFS’ CFO Ira M. Birns. “We are laser-focused on further reducing expenses and prudently managing cash, while carefully navigating through what has certainly become a highly complex operating environment. In addition, we have continued to do all that we can to support our customers, suppliers, employees and their families during these difficult times.”

 

That gloomier picture is reflected in the metrics of the more general vessel segments plying North American waters. Container traffic has seen a sharp reduction in box traffic since the onset of the pandemic – not helped by further antagonism towards China by the US government, with May’s year-to-date loaded container numbers provided by the National Retail Federation’s Global Port Tracker, as reported by the Pacific Merchant Shipping Association, down 6% across the US and Canada, but most of the losses contained to the month before (down 15% on average).

“No one expected May’s container trade numbers to be anything but awful. And, judging from the port TEU tallies posted so far, it looks like no one will be disappointed,” the PMSA pithily observed. The country’s third largest box port, Long Beach, reported much the same continuing into June, down 11% on 2019, meaning cancelled sailings as trade demand continued to be poor and an overall half-year drop of 7%. Reduced ship calls, though, are of most immediate concern to fuel suppliers.

 

“Cancelled sailings continued to rise at a rapid rate in the second quarter as ocean carriers adjusted their voyages to a decline in demand for imports during the national Covid–19 outbreak,” said Mario Cordero, executive director of the Port of Long Beach. “The economic challenges may persist for some time, but the Port of Long Beach continues to invest in infrastructure projects that will meet the needs of our customers.”

 

According to the port, the San Pedro Bay ports complex – Long Beach and L.A. combined – had 41 cancelled sailings in the first half of 2019. This year it was 104 – 37 of which were destined for the Port of Long Beach.

 

When the traffic figures were released in early July, the port said that cancelled sailings were projected to “significantly recede” as the traditional holiday peak shipping season ramps up during the third quarter. The San Pedro Bay ports anticipated five canceled voyages over the next three months. No blank sailings were reported by both ports during the same period last year.

 

However, projections of any kind in 2020 have proved difficult, and never more so than in the currently spiralling US pandemic, with California hit particularly badly at the time
of writing. What shape the peak season for North American shipping might look like by Q3 is, frankly, anyone’s guess.

Houston has remained competitive despite the current economic turmoil ©Patrick Feller/cc-by
Houston has remained competitive despite the current economic turmoil ©Patrick Feller/cc-by

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