Turkey and its bunker sector have endured a tumultuous year, with tough local lockdown measures following the (at the time of writing) fifth highest confirmed Covid caseload in the world. At the same time, the country’s economy – passenger shipping aside – was able to open to a large degree over the second half of 2020 and a very active vaccination program is underway. World Bunkering spoke to Energy Petrol CEO and chairman of the Turkish Chamber of Maritime’s bunker committee Mustafa Muhtaroglu to get an idea of the situation on the ground – and the outlook for the rest of 2021. His verdict? Something of a mixed bag.
“2021 so far is not very brilliant but very unstable, very volatile. The market is trying to find ways following news on vaccinations, the number of cases, lockdowns, recovery news, etc… Nothing is yet balanced, moving on changing news every day, which makes all segments very difficult to manage, so first we need some kind of stability in the markets.
“Surprisingly, the shipping markets have been good. Freights are healthy, helping the supply chain to be maintained. However, we do not still see good markets, high demand for the bunker industry. Bunker demand in most areas is still low and very much changing, very volatile. While supply is good, plenty of products are available everywhere which stresses the markets and almost all players are working in
a ‘no margin’ situation, relying on good earnings in 2019 and partly in 2020. However, this seems unsustainable so we have to see something happen at some point, maybe consolidations, maybe withdrawals. To be realistic, the market needs to find its new balance.
“At this point we have to take into consideration new fuels. We read a lot of new things every day about new fuels including LNG, ammonia, methanol, biofuels and hydrogen etc. To reach IMO emission goals we need to find new fuels for shipping.
“We started with LNG and already some 200 ships are LNG-powered along with several newbuilding orders especially by container lines. In this concern, we also see several LNG-supplying barges available already.
“Turkish state company BOTAŞ is ready for LNG bunkering from their plant near Istanbul. However, no LNG barge is available yet, so we have to wait and see when physical deliveries can start – while following news about LNG being described as not good enough for emission goals and the World Bank recently announcing that ammonia and hydrogen are future fuels for shipping. So we have to really wait and see all such developments.
“The Turkish bunker market in fact managed the 2020 transition period and the pandemic situation very well. We have strong, well-established, solid companies so we have not suffered much. Yes, the market can’t generate profit, but at least it’s keeping its position in the region. Sure, volumes have decreased compared to their historical high in 2018, but losses in 2020 remained only 10%.
“To be honest, the 2018 record level of 3 million tonnes was achieved after 20 years of effort and investment, so it’s not easy to reach the same levels for a new product like VLSFO which is not produced in Turkey. We are now a 100% import market for VLSFO, the main bunker fuel for shipping. Istanbul’s bunker market grew on the basis of supply security offered by Turkish refineries. Yes, they have never been the biggest source for the bunker market, however they were playing a very critical role by means of supply security and regularity with a very stable pricing mechanism.
Now we have completely new market conditions, new products, import basis avails and a very new pricing mechanism based on ICE gasoil quotes, plus the pandemic situation affecting demand and operations very much, which all need time to be stabilised. Then we can make it grow again.
“I can say the main Turkish players are healthy, long established, financially strong and already completed their investments. We have over 60 bunker barges and over 250,000 cubic metres bunker storage capacities so we can say the Turkish market is always on track and ready to be the best alternative for ships for the best quality bunker supplies in the area.”
Celebrating the addition of a new tanker to his company’s fleet in March, CYE Petrol CEO and Turkish Bunker Association head Deniz Eraydin was perhaps more damning.
“The number of ships passing through the Turkish Straits has decreased by 15% in the past 8 years,” he said. “On the other hand, the bunker supply tonnage we have at our ports increased from 1.4 million tonnes in 2013 to 3 million tonnes in 2018. This level decreased to around 2.2 million tonnes in 2020 as a result of the wrong choices of the private sector, the dubious efforts of the sector’s representatives, and the insistence of our bureaucracy on faulty practices and ignoring all warnings. By 2020, 3.5 million tonnes should have been passed.”
Regulations affecting the more efficient bunkering of larger vessels were the principal target for his ire. “We are of the opinion that there are generally two reasons for the decrease in the number of ships passing through the Turkish Straits. First, the shrinkage in the global economy. Second, the tonnages of the newly commissioned ships are larger than the old ones. When you examine the sector in this framework, it can be understood that there is piecemeal growth in the portions of refuelling made to large ships.
For example, in the past, we were supplying 2000 tonnes at a time to a ship that made a voyage on a certain line. Now we are refuelling 3500 tonnes at a time to the ship operating on the same line. Therefore, tankers with a size of 2,000-4,000 gt that can supply higher amounts at a time are needed. On the other hand, our bureaucracy requires the application of a pilot to tankers above 1,000 gt for safety reasons.
“This contributes nothing to safe operation, but due to this practice, which causes delays and high costs, the Turkish bunker sector is forced to use tankers below 1,000 gt. [Those] tankers are also needed. But there are six tankers of [under] 1,000 gt, twice as much as you need. We do not have enough tankers over 1,000 gt to meet international demand. As far as I know, there are around 150 commercial Turkish-flagged tankers in the world. 70 of these 150 tankers serve as ‘bunker carriers’ in our sector. “As it can be understood from here, our ‘Turkish commercial tanker fleet’ has been shaped incorrectly as a result of the insistence on the application of wrong rules incompatible with international operations. While tankers below 1,000 gt could not find enough jobs, large tonnage jobs were lost to rival ports due to insufficient tankers over 1,000 gt. We hope that our bureaucracy, which has preferred to maintain this negative experience, despite all the warnings we have given since 2017, will do what is necessary as soon as possible.”
Strong words, and Turkey’s maritime authorities have introduced some new rules of interest to the bunker market, but not relating to bunkering operations and tonnage limits. Instead, Turkey joined the ranks of port states banning open-loop scrubber washwater discharge within its waters, based on its marine pollution regulation.
Owners of the pro-scrubber pressure group the Clean Shipping Alliance were understandably frustrated. “We understand that Article 23 of the Regulation is intended to protect against the disposal of liquid or solid waste from vessels and their cargoes,” said chairman Capt Mike Kaczmarek. “But unlike the clear examples in the regulation, washwater from exhaust gas cleaning systems should not be interpreted as a form of marine pollution.
These systems have been in use for decades and there is absolutely no evidence of any negative impact on marine life or sea water quality, neither in open waters nor in port environments.”
“Decades” is doing a lot of work in that statement given that marine scrubber installations were still very much in the trial and effluent-evaluation phase from the mid-Noughties to the early 2010s, but the point is genuine. On the other hand, it’s hardly surprising if port states, rightly or wrongly, adopt an increasingly precautionary approach.
There are no such fears yet in Greece, where owners and operators have continued to invest heavily in scrubbers, not least of all the cruise lines that represent such an important chunk of the country’s bunker sector. Cruising was almost non-existent in 2020 but is due to recommence in Greek waters at the time of writing, with German operators Tui and Aida the first back in the water while NCL and Celebrity are scheduled to follow later in the summer. Priority vaccinations given to the tourism sector and the Greek islands, coupled with stringent testing requirements and green-lighting of international travel to and from Greece, should, operators hope, make for a successful season – and a consequently improved year for bunker suppliers whose volumes were hammered in 2020 by the loss of the passenger sector.
Suppliers certainly spent the late stages of 2020 expanding their Greek operations, presumably in anticipation of a sharp recovery. UK-based Propeller Fuels opened its first Athens office in November. Fratelli Cosulich set up its new trading arm in Greece at the turn of the year, describing it as “one of the most important markets in the shipping industry” and one it had been “looking at for a long, long time”. Greece’s own Finecor expanded into the north and central ports of the country in November too, being given a bunkering licence to load fuel from Hellenic Petroleum’s Thessaloniki refinery. And, aiming to reduce demand for all those suppliers’ products, Maersk fuel efficiency software offshoot company ZeroNorth opened an office in Piraeus in February.
ZeroNorth CEO Søren Meyer said: “We are extremely excited to open our Greek office, giving us a presence in shipping’s largest ownership market. At a time when more of shipping is embracing digitalisation with increasing pace, we think it is important to support Greek owners and operators to optimise their operations and profitably decarbonise.
“This move means that we can work closely with Greek tramp shipping market leaders to explore how [the company’s software system] Optimise can generate increased revenue and reduced emissions. I am confident that Greece’s vibrant and close-knit maritime community will immediately understand our vision of digitalising shipping for the climate and join with us in our efforts to create more economically and environmentally sustainable operations.”
It has local competition, though, in the shape of Metis Cyberspace Technology. The company, which has been developing its own analytical software evaluating financial, operational and emissions implications in ship operation for the past few years, says it’s not the first such firm offering a tool able to advise owners about the trade-off between emissions reduction and debt servicing under Poseidon Principles financing.
“Assessing whether ships merit further investment to keep pace with the IMO average efficiency ratio (AER) underpinning the principles will be key but, to date, exact emissions targets have not been forthcoming,” the company said. It touts its system as the first viable methodology allowing owners to predict whether their ships would benefit most from investment, a change in operating profile or disposal in response to advancing emissions rules, and perhaps to lower borrowing costs for owners with vessels outperforming AER.
CTO Serafeim Katsikas said: “We have built on the Metis infrastructure, drawing on signals from the ship and external sources to create structured and meaningful indexes for the Poseidon Principles. Following the recent launch of Metis Charter Party Agreement ship performance monitoring, we are bringing another maritime game changer to market. Already, a pilot has seen one owner conclude that, while some of its ships may never need investment to cut emissions and others need action now or at a future date, two should be disposed of immediately.”
“The machine learning METIS deploys retrains automatically every month and evaluates itself every seven days, so we can find out the correlation between weather, hull fouling, power use, fuel efficiency and so on. This is invaluable for evaluating new technologies, but also for voyage analysis for correcting common errors.”
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