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Eco rules will result in credit tightening over fuel supply: top trader
THE single biggest challenge in the shipping industry when it comes to fuel supply is liquidity and credit, says Dynamic Oil Trading, a global trading company for marine fuels and lubricants.
The company said the 0.1 per cent Emission Control Area (ECA) regulations and the increase in distillate use, will lead to higher demand for more credit among shipowners and operators and further consolidation among bunkering companies.
"In today's bunker market, cash is king and those in the market who lack the financial strength and access to capital will find it very hard to compete and grow," said Dynamic CEO Lars Moller.
"This trend will become more acute following the introduction of the 2015 ECA regulations due to increased distillate use. Put simply, customers operating in ECAs and burning distillates to comply will require significantly more credit than those operating outside ECA waters.
"Many bunkering companies are already finding it hard to finance the shipping industry in its current form. Having to further increase credit will act as a catalyst for more consolidation," said Mr Moller.
The company also believes that as the demand for credit increases, so too will the stringency over counterparty risk.
"As the amount of credit increases, so does the risk. The financial viability of who we provide credit to is critical, and the due-diligence that is conducted will be of paramount importance."
The company said the 0.1 per cent Emission Control Area (ECA) regulations and the increase in distillate use, will lead to higher demand for more credit among shipowners and operators and further consolidation among bunkering companies.
"In today's bunker market, cash is king and those in the market who lack the financial strength and access to capital will find it very hard to compete and grow," said Dynamic CEO Lars Moller.
"This trend will become more acute following the introduction of the 2015 ECA regulations due to increased distillate use. Put simply, customers operating in ECAs and burning distillates to comply will require significantly more credit than those operating outside ECA waters.
"Many bunkering companies are already finding it hard to finance the shipping industry in its current form. Having to further increase credit will act as a catalyst for more consolidation," said Mr Moller.
The company also believes that as the demand for credit increases, so too will the stringency over counterparty risk.
"As the amount of credit increases, so does the risk. The financial viability of who we provide credit to is critical, and the due-diligence that is conducted will be of paramount importance."
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