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WFS urges for better understanding of ‘risk management’ in volatile market

WFS urges for better understanding of ‘risk management’ in volatile market
Global bunker fuel trader World Fuel Services (WFS) is pushing for a stronger understanding of the term ‘risk management’, particularly in an increasingly volatile market with many potential pitfalls.

The term ‘risk management’ in bunkering is often used in a rather narrow sense of applying analytical tools and hedging strategies to handle fluctuations in the price of marine fuel.

However, a holistic risk management strategy would encompass much more, such as identifying and quantifying all dangers in the market, and developing strategies to protect the company, according to Paul Lowther, director of marine marketing at WFS.

WFS said suppliers may be loathed to give credit and are very slow to process any new applicants, but a global trader on the other hand will have established network to tap on.

“We are a trader and a trader brings certain advantages and one of those is credit, as part of our job everyday is to help customers manage risk. Another advantage we bring is that as we buy bigger fuel volumes we can better aggregate prices and secure more favourable prices for customers,” Lowther told Seatrade Maritime News in an interview during SIBCON held in Singapore.

Lowther added that WFS has over 30 maritime offices worldwide, giving the group the benefit of local presence and proximity to its customers globally.

“With volatile oil prices, some companies would like to protect their prices at certain levels so they can budget their fuel spendings. WFS offers tools to assist our customers via a specialised risk management team,” he said.

In today’s challenging market, alarm bells will ring unexpectedly when a big trader, supplier or shipowner goes under, leaving a slick of unpaid bunker fuel bills.

In 2016, Hanjin Shipping’s demise has caused ripples through the market, and the industry is still reeling the effects of OW Bunker’s sudden collapse in 2014. OW Bunker, a big global trader, started 2014 promisingly with an IPO on the Copenhagen Stock Exchange but by November that year it filed for bankruptcy, sunk by debts of more than $1bn.

“Choosing the right counterparty is a critical decision, WFS recommends industry players to look for partners who have track records and are diversified across multiple businesses,” Lowther said, pointing out that WFS operates not just in marine but aviation and land as well.

In 2015, WFS supplied around 33m metric tonnes of marine fuel from 54,000 transactions over 1,200 global sea ports.