World Bunkering Autumn 2010 33 INDEPENDENTS I ndependent bunker suppliers continue to play a major role in the global industry, and the signs are that several of the most dynamic of these companies are set for significant expansion. That the independents are certainly not insulated from the troubles of the world economy is demonstrated by the first quarter loss of $ 13.5 million reported by Singapore- listed Chemoil. Gross contribution per metric ton ( GCMT), the company's key margin indicator, fell to $ 1.74 compared to $ 8.74 for the same period in 2009. Sales volume was down 2% to 3.7 million tonnes, " attributable to lower wholesale volumes in Europe, the Americas and Asia, but compensated by higher retail sales". Even so, Chemoil's chairman and ceo, Mr Mike Bandy, com-mented: " Despite the continued weakness in the global shipping industry, Chemoil has consolidated its market position in the retail bunker segment as reflected by our improved delivery volumes with 2.5 million tonnes for the first quarter of 2010. This represents an increase of 14% from the corresponding period last year, and accounted for about two- thirds of all our volumes. However, we face a continued narrowing of wholesale- retail spreads reaching among the lowest levels in recent years due to weak demand and the lack of cheaper fuel sources." Referring to the company's recent takeover by Glencore, Mr Bandy concluded: " Now that the uncertainty over our ownership and listing status has been resolved, our focus can be directed towards realising the potential synergies of having two major international trading houses as our shareholders and who will be our partners in delivering value for our customers and shareholders." Expanding the network Chemoil had already hit the expansion trail before the merger but is by no means alone. Peninsula Petroleum is also extending its network rapidly and has just opened a new Tokyo branch to boost sales in the Japanese and South Korean markets. The company is targeting annual sales of 1 mil-lion tonnes, according to Bloomberg calculations. Peninsula's Tokyo office is its 11th, with others including branches in Geneva, Dubai, Athens and Montevideo. A company spokesman said Peninsula was also eyeing the North American market. OW reviews structure Rapid expansion has prompted another large independent, OW Bunker, to review its structure. The company's vice president, Götz Lehsten, said: " OW Bunker has shown exponential growth over the past few years, and has put a new strategy in place to ensure that the group can sustain this level of growth and meet its ambitious corporate objectives and expansion plans, as a global, full service bunker supplier." He explained that the global business and sales strategy will be devolved from a central function, and delivered and managed across the five key regions where the group has a significant presence: Asia, Northern Europe, Central Europe, the Mediterranean and the Middle East, and South America. He added: " Ultimately, success in this market is being able to anticipate and appreciate the changes that have occurred over the past two years, particularly in relation to the economic downturn. Independents in expansion mode As David Hughes reports, the global economy may be going through a downturn but some of the larger independents are in optimistic mood

34 World Bunkering Autumn 2010 OW Bunker has done this successfully, especially with regards to identifying the new and increased areas of risk that need to be managed. For example, the Group established a new internal credit management department to work very closely and transparently with customers to effectively manage credit lines. As well as providing appropriate protection, this has also acted as a catalyst to develop-ing positive and closer working relationships with customers based on a fundamental understanding of their business operations and associated challenges in line with the current economic climate. This has served to ensure a very strong customer retention rate, as well as acting as a catalyst for securing new business." What does the future hold for the independents, World Bunkering asked? Mr Lehsten replied: " In the fuel supply market, it is the large independent, global organisations, like OW Bunker that are driving progression. Independents have the flexibility within their business models to innovate, and to provide customers with a premium level service. Those with a significant physical presence and global scale also have the ability to act as market makers, again providing customers with flexibility in pricing, based on effectively utilising the paper struc-ture, and leveraging accordingly where there is volume. This enables us to give customers the best possible price, as well as service." " And," he continued, " because independents operate right at the coal face of the industry, based on their in- depth knowledge and understanding of the market, they have the ability to spot and antici-pate trends, which enables them to add further value to the customer, and build closer, stronger and partnership- based relationships." He said there had undoubtedly been consolidation within the market as a result of the economic downturn. It has been particularly tough for the smaller operators, who do not have the liquidity or resources to manage the increased financial risks of buying and selling fuel oil. However, he noted, for the larger global operators that do have the financial strength and infrastructure, the downturn has also represented an opportunity to expand both organically and through acquisition. " I believe that we will continue to see further con-solidation. Not just as a result of the continuing effects of the global financial situation, but as customers continue to see the benefits and want to work with the larger independents that can provide a global fuel procurement solution, as well as advanced risk management services; solutions that are wholly focused on increasing efficiencies, and maximising profitability," he said. Challenges ahead Mr Lehsten accepts that the industry has been and continues to be faced with significant financial and legislative challenges. The economic downturn has created more financial risk within the market, and environmental legislation, specifically related to levels of sulphur, provides challenges for shipoperators in terms of supply, as well as technical issues when switching from high to low- sulphur fuel oils and below. However: " This presents opportunities for fuel suppliers to add value to their customer relationships, by providing solutions to these challenges; having sufficient financial transparency, and helping them to implement effective risk management strategies; ensuring there is sufficient availability of supply to meet their demands for low- sulphur fuel oil; as well as guiding them through the in- depth technical process of switching fuels so they avoid any potential hazards," he said. While some independents are set on expanding their global reach, others are more focused on particular regions. Austrian- based OMV has specifically developed its marine product portfolio to respond to the needs of transportation on inland and coastal waterways in and around Central Europe. In doing so it now covers the whole the Danube as well as Constanta in the Black Sea and Koper in the Adriatic. In Turkey, OMV has a strategic alliance with Petrol Ofisi Marine. Some independents are pursuing a global expansion strategy