MFM impact examined at IBIA’s Annual Convention in Singapore
There is no doubt that the introduction of mandatory use of mass flow metering systems (MFMs) in Singapore has had a profound impact on the market in the world’s leading bunkering hub. By and large, it has been a force for good, according to speakers and panellists at IBIA’s Annual Convention in Singapore in November.
Esben Poulsson, President, Singapore Shipping Association and Chairman of the International Chamber of Shipping, who was the keynote speaker at IBIA’s Annual Convention, highlighted the positive role played by the Maritime and Port Authority of Singapore (MPA) in the port and in particular the introduction of mandatory use of MFMs for marine fuel oil supply to increase efficiency, transparency and minimise disputes. That sentiment was seconded by Timothy Cosulich, Chief Executive Officer, Fratelli Cosulich. Still, Poulsson noted, vigilance is required to prevent suppliers trying to “beat the system” as the systems become more sophisticated. Choong Zhen Mao, Executive Director, Equatorial Marine Fuel Management Services Pte Ltd, which delivers about 10% of fuels sold in Singapore, said the cost of business has gone up, and that he was pleased that MPA is proactive in rooting out malpractice.
Mandatory MFMs has had a positive impact on bunkering volumes with Singapore on track to break its 2017 record of 48.6 million tonnes in 2017. “We see buyers taking bigger parcels now,” Md Elfian Harun, Assistant Director, Bunker Services Department at MPA and one of our panellists said. Mohamed Abdenbi of MFM manufacturer Endress + Hauser said the most positive side-effects were improved efficiency and reduction in time spent negotiating a final figure for the delivered volume after each delivery. The MFM figure is binding and although there are still discrepancies between ship and the BDN figure, overall it seems owners have confidence in the MFM figures. Abdenbi said the next step should be to use the MFMs across the supply chain, including when barges lift cargoes at terminals, as this would harmonise systems and be fairer. IBIA is supporting an initiative to bring this about.
Another impact of MFMs is more indirect, but equally profound. Maritime lawyer J. Stephen Simms, Principal, Simms Showers LLP, highlighted that three of the top 10 suppliers in Singapore have disappeared from the market since the MFM regulation took effect, having lost their licences.
Increased transparency on delivered volumes, combined with MPA clamping down on attempts to circumvent the system is, bit by bit, weeding out operators who offer suspiciously low prices. John Phillips, head of bunker credit management at GP Global APAC Pte Ltd, said the price spread between ex-wharf prices and delivered prices should be high enough to cover transportation cost, but they haven’t been, and if this continues there won’t be many companies with deep enough pockets to survive.
During the MFM session, we ran a poll, with results as follows:
How much more will you pay to receive a delivery via MFM?
Nothing – 66%
$2 to $3/ton – 21%
$3 to $4/ton – 5.5%
More – 7.5%
The results seem puzzling when there was such widespread agreement among the speakers and panellists that MFMs are helping to ensure that the recipient is getting what they pay for, and that many suppliers in Singapore have previously not been charging delivered prices that cover the cost of doing business.
Could it be that the majority of delegates were thinking that the question was irrelevant in Singapore, all deliveries of marine fuel oil must be done via MFMs? Or were there a large number of MFM sceptics in the audience? Or perhaps the majority of those voting in the poll think traditional methods for measuring delivered volume are good enough and prefer the ability to settle quantity disputes by negotiations rather than have them dictated by a mandatory MFM reading?
One thing is for sure: the way Singapore deals with MFMs is of great interest around the world, and deliveries of marine gas oil (MGO) are next. Testing is now underway to ensure MFM systems for MGO are accurate before MPA goes ahead and mandates their use.