Credit Where Credit’s Due
In this detailed discussion of bunker credit issues, Steve Simms of Simms Showers offers a useful checklist for bunker suppliers when tasked with making sound credit decisions
Back, back to the end of 2019. 0. 50% sulphur content bunkers would be the worldwide standard. Futures prices of very low sulphur fuel oil (VLSFO) were rising. Predictions were that only the deeply capitalised traders would survive and traders less so, would fail or be absorbed. But then, 2020, COVID-19, and the expected credit situation of 2019 hasn’t come to pass – yet.
Astute credit management will be essential to bunker traders of any size as the market reawakens from what was expected at the end of 2019 – and moves through 2021 and beyond.
‘Successful bunker selling is what makes money both for sellers and customers. It also is what makes sellers, bigger sellers and, paradoxically, able to take more risks and weather more decisions which may sometimes turn out to be unprofitable’
‘Sound credit decisions now – as they always have – turn on how much information you have about the customer’s assets and the strength of your potential recovery, or if you don’t have the information, how you can get it’
‘One size’ – whether that is BIMCO 2018 or some other set of terms – does not ‘fit all’ for every provider; instead, it is important to understand your customer base and the risks of that base, including how the jurisdictions in which you are providing bunkers, and in which you may have to seize assets or arrest vessels, will treat your terms and conditions. It may even be appropriate to have varied terms and conditions, depending on the customer involved.
Especially in this area, working with experienced legal counsel who regularly review your terms and conditions of sale is essential and one of your best investments. Without that, your recovery and loss expenses may prove to be much more than you would ever invest on the ‘front end’ to have strong and regularly up to-date terms and conditions and credit terms. Credit always has been and will continue to be essential in the maritime industry generally, and in the bunkering industry particularly. Good credit decisions will be more challenging as the industry considers new fuels, and less-capitalised traders seek to compete by taking greater but hopefully more educated credit risks. So, the last year or so may have been somewhat of a pause but now particularly is the time for bunker sellers who want to do well to take consideration of making sound credit decisions with the sales terms supporting them.