4 July 2018
It’s one thing to own over fifty mid-size tankers, build them, finance them and crew them, but the challenges of operational risk arrive when the rubber hits the road, or in this case when the steel hits the ocean.
Our trading risk – being in the wrong trade at the wrong time is – somewhat dealt with by the size of our fleet, by building a platform with our pool partners to spread the risk across different markets. This has served us well in the last two years where the quality and flexibility we provide to our customers has enabled us to outperform peers. Dedicated and experienced Chartering staff who can rely on in-house research and broker information have guided us through this rocky period.
However, with the tanker market (hopefully) moving into a phase of more volatility, bunker prices are rising whilst bunker grades and regulation are changing. This is how we view our major operational risks:
- Quality and Availability of Bunkers
- Counterparty Risk
- Charter-Party Terms
- Piracy
Quality and Availability of Bunkers
We’re witnessing some bunker supplies using additives as they prepare for 2020 Low Sulphur Regulations to test different blends, some of which are harmless or can be treated by counter-balancing with our own additives, and some of which are just nasty and toxic. It’s the latter than concerns us although with the former there’s obviously an increased cost of buying additives to help the bunkers viscosity etc. But how to avoid the nasty toxic stuff?
Firstly, we buy from suppliers we know and trust when available but this isn’t a failsafe guarantee. Checking bunker alerts will tell us where problems are likely to come from, and if we can, test before bunkers are taken and definitely before they are used.
There’s an ISO Standard stating ‘the fuel shall not contain any additive at the concentration used in the fuel, or any added substances or chemical waste that jeopardizes the safety or adversely affects the performance of the machinery of is harmful to personnel or contributes overall to additional air pollution’. Well intentioned, but unfortunately vague.
De-bunkering a ship in any market is commercially painful and something to be avoided through a series of mitigation processes by our Bunker group, Commercial Operations and Technical Management.
Counterparty Risk
Much of our business at Teekay is developed around business with customers we know and trust. However, there will be times when CobraToro Chartering* approach us looking to charter one of our ships.
Here’s what we’d want to know:
- Has CobraToro chartered ships before? If so, how did they perform, did they pay freight and settle demurrage?
- Are they bankable, would they offer to settle freight BBB?
- Do they comply with USA / EU / UN Sanctions?
- Does their voyage include a port or area we consider unsafe and will not risk sending vessels to?
Also, in times of economic hardship, how much freight are we comfortable having outstanding with any one counter-party. Our Chartering desk and Middle Office use market intelligence and background checks to assess new and monitor existing customers whilst Commercial Operations will maintain a data base of trading exclusions to avoid.
*To the best of our knowledge CobraToro Chartering does not exist as a Charterer of ships
Charter-Party Terms
Interpretation of some CP terms will change over time, whilst other new terms are introduced. New regulations international shipping needs to comply with will bring on some of these terms.
Consider terms that protect owners in the following areas:
- Non-availability of complaint fuels
- Consumption claims when dealing with new grades of fuel
- What are you actually warranting when Scrubbers and Ballast Water Treatment Systems are fitted and operational?
Piracy
Largely a risk that international shipping has dealt with over the last few years, whether it be Armed Guards and Convoys in the Gulf of Aden or Escort Boats off Nigeria. However, with oil prices rising will pirates use new tactics to board ships and demand ransom? Don’t let your guard down.
Shipping doesn’t have to be a risky business – by joining our pools in Suezmax, Aframax or LR2 segments we make sure these and other risks are covered. Be aware, be conservative and be safe.
Drop us a line to have a chat about our flexible and transparent pooling solutions.