INTERVIEW: CPN Sees Middle East Conflict Highlighting Need for Reliable Bunkering Partners
CPN sees reliable service as higher priority than 'chasing margins'March supply concerns drove need for bunker orders four to six weeks in advancePolicy uncertainty holding back buyers from taking advantage. . .
CPN sees reliable service as higher priority than 'chasing margins'March supply concerns drove need for bunker orders four to six weeks in advancePolicy uncertainty holding back buyers from taking advantage of cheap biofuelsThe upending of global bunker markets as a result of this year's conflict in theMiddle Easthighlights the need for buyers to find reliable partners for marine fuel supply and trading, according toChimbusco Pan Nation. Concern over potential supply outages drove prices tofour-year highsinMarch, and they remain well above levels seen before the outbreak of war at the end ofFebruary. Fulfilling customers' requirements, including contractual commitments, without disruption should remain the core obligation of bunkering companies at times of market stress like those seen this year,Calvin Chung, director of CPN, said in an interview withShip & Bunker. "In a volatile environment like this, the temptation to chase margin is real, but what our customers need most is a stable and reliable partner," Chung said. "That has always been our priority, and it doesn't change because markets get choppy. "While CPN does look to capture market opportunities where appropriate, the firm prioritises disciplined risk management and supply-chain stability over chasing short-term margin improvement, he argued, with the aim of securing its business over the long term rather than chasing short-term gains. Supply ConcernsMuch of the price surge in March was driven by the concern that the near-standstill inStrait of Hormuztransits would inevitably lead to supply shortages at bunker hubs. CPN saw bunker stems needing to be orderedfour to six weeksahead of delivery at this point, up fromfive to ten daysin advance before the war. InAsia-Pacific, the central fear was that disruption to Middle Eastern crude flows would slash refinery runs and immediately tighten VLSFO and HSFO availability in key markets likeSingapore,ZhoushanandHong Kong, Chung said. Steep backwardation in the paper market appeared to confirm this concern at the time, pointing to significant short-term supply concerns. In the event of the conflict drawing to a close - a prospect looking more distant this month with renewed exchanges of fire between theUSandIran- Chung does not expect any rapid return of bunker prices to the levels inFebruary. While crude prices have recently touched pre-war levels again, bunker prices still reflect a product-market premium and may stay elevated until the market gains confidence that blendstock and refinery output are on a clear recovery path, he said. CPN expects bunker prices to takeone to two months longerthan crude to normalise. Biofuel BoostOne of the prominent secondary effects of the war in the Middle East has been a significant narrowing of premiums for biofuel blends over conventional bunkers, with biofuels remaining comparatively stable while fossil fuel prices surged. But this has not yet resulted in a sustained increase in biofuel blend sales in Asia-Pacific, according to CPN. Chung argues that policy uncertainty remains the main obstacle, with most market participants adopting a wait-and-see approach rather than making long-term procurement commitments. "Short-term price movements can open a window, but they cannot build a market," he said. "Without a clear and mandatory regulatory signal, most buyers will always default back to conventional fuel the moment the economics shift, and they always do. "For a larger biofuel market to emerge in Asia-Pacific, Chung sees the market as needing a clear financial penalty for excess emissions, allowing shipowners to calculate compliance costs precisely and suppliers to justify capital-intensive infrastructure investments. CPN expects a true commercial take-off in the biofuel bunker market not to emerge until2027-28, backed by the enforcement of global mandatory frameworks. IMO ExpectationsThose waiting for that kind of jump in biofuel demand will be watching closely proceedings at the IMO later this year, with the next MEPC meeting at the end of the year set to provide an update on the future prospects of the UN body's Net-Zero Framework. CPN is among those supporting the emergence of a global standard for marine fuel emissions, on the grounds that the current prolonged uncertainty is slowing the pace of global green infrastructure development. "What the industry needs most right now is certainty, not perfection," Chung said. "A stalled or compromised framework doesn't just slow decarbonisation, it actively prevents the investment that makes decarbonisation possible. "Every month of regulatory uncertainty is a month of infrastructure investment that doesn't happen. "When it comes to the firm's actual expectations - as opposed to what it wants to happen - Chung argues continued compromise is the most likely outcome later this year, with the MEPC meeting producing a framework with significant flexibility built in on timelines, compliance thresholds or both. In the event of the NZF not being passed, fragmentation of GHG regulation into regional maritime policies is 'practically inevitable', Chung said. CPN expects this is likely to involve major bunkering hubs and cargo gateways introducing independent measures on GHGs, leveraging infrastructure dominance rather than broad mandates. These measures might include expanding domestic carbon trading pilots to coastal shipping, adjusting port dues and introducing targeted fiscal incentives to bridge the green premium locally, Chung said. About Jack JordanJack Jordan is the Editorial Lead - Insights for Ship & Bunker, the world’s most read marine fuel-focused publication. He is an experienced financial editor and reporter with a first-class degree in Arabic and Russian, a postgraduate diploma in newspaper journalism and several years' history of covering the oil and shipping industries and capital markets. Jack is based in London, UK. About Ship & BunkerShip & Bunker is the world's most read publication focused on the marine fuel markets. Completely independent, it is the leading industry authority providing comprehensive daily news, exclusive in-depth features and analysis, along with daily & historical bunker price indications. To contact the editor responsible for this story email us at[email protected]