Welcome to Plaza Marine                               Prices are dropping! Call 1-800-682-3835 for quantity discounts.                               Call for terminal availability, 24 hours per day!!                                  Plaza Marine is a proven supplier of marine fuel and lubricants serving the east and Gulf Coasts of the United States since 1989. Twenty-four hours a day, seven days a week our customers receive top grade marine gas oil, marine diesel oil, international marine fuel, and lubricants directly at the port or delivered by barge, tank truck, or metered dockside facility. Call Plaza to receive a credit package. Download a 'Credit Application and Sales Agreement'

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Plaza Marine is a proven supplier of marine fuel and lubricants serving the east and Gulf Coasts of the United States since 1989.

Twenty-four hours a day, seven days a week our customers receive top grade marine gas oil, marine diesel oil, international marine fuel, and lubricants directly at the port or delivered by barge, tank truck, or metered dockside facility.

Plaza Marine maintains supply points at all major points of call along the Eastern and Gulf coasts of the United States.

The following is the text of the keynote address given in March 1998 to the Singapore International Marine Bunkersing Conference (SIBCON), by Andrew Cates, CEO of Shell Marine Products Ltd.

Nowadays, globalisation is all around us: in our private life as well as in our business life. Globalisation in the shipping industry and Marine Bunkers business has been a buzzword for quite some time. So why then have I chosen this moment to talk about the impact of globalisation on the Marine Bunkers business ?

The answer is that whereas in the past globalisation was something which all but the largest players could afford to view from a safe, disinterested, distance now there is a dynamic sucking us all in. The dynamic comes from the interplay of globalised communications (especially IT and market transparency), globalised competition and globalised regulation, each driving the others and affecting all players in the market. Only Marine Bunkers buyers, Marine Bunkers suppliers and ports which come to terms with this will have a longer term viable future.

Today, then I will focus on three dynamic forces:

• global competition
• global information and infrastructure
• global regulation

I will consider the consequences of these trends on the three main groups of players in the Marine Bunkers industry, namely:

• Marine Bunkers buyers
• Marine Bunkers suppliers
• ports

and what they mean for the future of the marine fuels business. I will simplify and generalise because of time constraints and also confine the discussion to the residual fuel oil business.

During the address a picture naturally emerges of our view of the challenges Marine Bunkers suppliers need to meet in order to maintain a viable marine fuels business in the future. To start with, I want to sketch quickly the long term global business environment within which these three global trends are operating.

2. Long term outlook
2.1 Supply and demand: a downward trend in fuel supply

Forecasting supply and demand in the oil industry is an inexact science, because it is the outcome of many contrary factors, some of which are economic, and some political. Three major ones for the Marine Marine Bunkerss business are:

• The Marine market is the only growing market for residual fuel oil. In particular, the power generation "dash for gas" will progressively release to the Marine Marine Bunkerss market fuel oil previously designated for power generation.
  
  
• Expansion of upgrading capacity in existing refineries will decrease the world residual fuel supply, even though some new refineries will come on stream. For example, assuming fixed crude intake, fuel production in Rotterdam would reduce by around 1 million MT per year.
  
  
• Lastly, and most unpredictably of all, the mix of light and heavy crude exported by oil producing countries will depend on their political constraints, which in turn will drive price differentials between the two, and price differentials between crude and fuel oil. Specifically, when countries impose tight production quotas they tend to maximise their revenue by producing a maximum of light sweet crudes. When production quotas are less strict, the proportion of heavier crudes yielding more fuel oil (but of higher sulphur content) increases.
  
  

  Having said this, I will do something which is always risky in the oil business, which is to make, if not a prediction, at least a best guess about the future. This is that there will somewhat shorter supplies of Marine Marine Bunkerss fuel oil overall in the coming years. Within this, there will be regional variations, with the larger shortfalls being in Europe, the Mediterranean and Africa. Pricing will be driven as ever mainly by crude oil pricing, but there will be a slow decrease in availability in a slowly growing market.

2.2 World trade pattern

Longer term world trade is expected to grow at rates around 3.5% per annum (although recent events in Asia make the lower end of this band a more likely outcome than the upper end). The trade patter will further globalise and lead to an increase of long pendulums from the US East Coast through the Mediterranean to the Far East (or maybe temporarily to Australasia/Japan while the Far East crisis lasts) to the US West Coast. This will make the North Europe/North America/Far East route less popular (Figure 1).

Keeping this business environment in the back of our minds, let me now start with a view of how the three global trends will affect the various players (Marine Marine Bunkerss buyers, Marine Marine Bunkerss supplier and ports) in the marine fuels business.

3. Global competition

The world as a whole is becoming ever more competitive because of decreasing trade barriers, decreasing trade barriers, decreasing protectionism (including in former centrally planned economies and Europe) and rapidly improving communications. (If I wish to buy a spare part for my car I can have it mailed from more than a dozen countries over the internet; five years ago I could not easily have tried further afield than my home town.) How does this affect our three players ? Being a customer oriented Marine Marine Bunkerss supplier, you will forgive me for starting with the Marine Marine Bunkerss buyers.

3.1 Increased global competition amongst Marine Marine Bunkerss buyers

Cost leadership

Revenue rates in many shipping businesses (particularly those accounting for much of marine fuels volume) show long-term decline and are not likely to improve structurally. Certainly they will never rise for long periods above levels where the cost leaders make adequate profits. The preparedness and ability of governments to protect their national shipping businesses from global competition is diminishing with deregulation. Therefore the freight shipping industry has tried to earn acceptable returns on capital by cutting costs.

Cost leadership is key in these businesses and the traditional view of 'Cost-driven Pricing' has been increasingly replaced by 'Price-driven Costing' (Figure 2): shippers will tell the carriers what is acceptable and the carrier will find a way to meet that price. Processes have been streamlined. Using larger vessels to increase the scale of operations, and therefore bring down unit costs, may not be the answer because the infrastructure is not there to use and it leads to high fixed costs. Therefore the scale of operations has been increased via organic growth, mergers, take-overs, consortia and alliances. Further industry consolidation is inevitable. The market share of the top 20 players in the liner industry is almost 50% now but is expected to grow.

Forming of alliances

Currently, in the container industry, six alliances have been formed of which the biggest are the Grand and New World alliances. These alliances have been restructured at the beginning of this year and it is assumed they are now grouped and around potential merger partners.

Competitive Marine Marine Bunkerss pricing

More competition and the drive for lower costs have made Marine Marine Bunkerss buyers price sensitive and they will continue to force the Marine Marine Bunkerss suppliers to quote competitive prices, and to provide quality service with low Marine Marine Bunkerss-related costs. Some of these are illustrated below (Figure 3).

Similarly, Marine Marine Bunkerss will use their combined negotiation power to push pot charges lower.

Requirement for global Marine Marine Bunkerss supply

The Marine Marine Bunkersss market is becoming more competitive but tighter. We believe the main drive which narrows price differentials is not supply-demand balance but is the market transparency (resulting from global communications infrastructure) which we will discuss later. Therefore we believe low price differentials between suppliers are here for ever.

Professional purchasers use matrices such as the one in Figure 4 to guide their buying approach. When examining the procurement of a given supply they classify it according to whether there is a lot of difference in price between suppliers and whether there are significant risks from supply failure. Low risks and high price differences imply a multi-supplier spot approach. High risks and low price differences imply a lot of in-house effort to manage properly. High risks and low price differences implies a strategic approach with one or several preferred suppliers.

Procurement Strategy Matrix: Marine Marine Marine Bunkersss

Clearly opinions vary on where Marine Marine Bunkerss fuels are to be found on this map. Certainly for container lines, fuel costs are growing as a proportion of overall operating costs and the pressure to reduce them is great. However comparisons between suppliers reveal small differences and the trend is fairly clear; price differences have narrowed and will continue to narrow, supply is tightening and risks are increasing. Therefore we are seeing a migration towards a strategic approach. The competitive fight amongst suppliers to survive in these circumstances is intense.

3.2 Increases global competition amongst Marine Marine Bunkerss suppliers

The converse, seen from the supplier's viewpoint, is that the days when many dozens of suppliers in each port can live off selling occasional parcels to visiting international vessels are numbered. Perhaps a dozen large suppliers will ultimately survive and they will tend to be low cost and global. They will have to operate to minimise all their customers' Marine Marine Bunkerss-related costs; cost of fuel of course, and cost of buying, cost of operational imperfections, cost of finance and administration, even cost of communications with suppliers. Undoubtedly this trend in buying approach makes the environment for the supplier tougher and more competitive in its turn.

Low cost operations, concentration to a few global selling centres

The competitive features described above and below have driven suppliers' margins down to low levels, where suppliers are forced to achieve continual cost reductions to survive. Independents led the way but oil majors like Shell have followed and restructured their operations. Most Marine Marine Bunkerss suppliers now have concentrated their sales effort into a limited number of lean and mean fuel selling offices. Easy access to global communication infrastructure has helped in building these vital global sales organisations. The challenge is to find funds from tight margins to fund investments necessary for further improvement.

In addition to price competition Marine Marine Bunkerss suppliers are looking to other ways to differentiate themselves and especially to reduce total Marine Marine Bunkerss-related costs for customers. I will look at some opportunities for Marine Marine Bunkerss suppliers in this area below. But let me first show how competition affects the other major players, the ports (Figure 5).

3.3 Increased global competition amongst ports

Not only are Marine Marine Bunkerss buyers and Marine Marine Bunkerss suppliers competing amongst themselves, but so also are ports. Ports can be contributing a significant part to the economic growth in their country of location, and are increasingly driven by globalisation to compete with each other. Not only are the port in South Korea competing with Singapore, and not only are Amsterdam and Antwerp competing with Rotterdam; Singapore and Rotterdam are fierce competitors of each other !

How do ports compete ? The simplest example is providing an extensive ports service portfolio of oil refining, terminal, ship repair and Marine Marine Bunkerssing and offering this at low port fees. Obviously ports can also compete on port fees, and do so.

Suppliers licence to operate and port Marine Marine Bunkerssing procedures

To attract Marine Marine Bunkerss buyers into their ports, ports authorities like Rotterdam and Singapore are pursuing regulations for Marine Marine Bunkersss operations. The categorisation of barges is a clear example in Singapore. In Rotterdam Marine Marine Bunkerss suppliers and operators have established a Marine Marine Bunkerss Monitor Platform. This Platform is developing a license to operate for Marine Marine Bunkerss suppliers. In the longer term, ports in the same area and other competing ports will follow.

This has two effects on Marine Marine Bunkerss suppliers:

1. It forces them to get their distribution act in line with these regulations, thereby eliminating substandard suppliers
   
   
2. Adherence may add to distribution costs and therefore may test the efficiency of suppliers in relation to their competitors.

But ports are not only facing competition from other ports. Alternative transport links are also forcing them to be more commercial. A good example of this is the port co-operation between Copenhagen and Malmo to beat the competition of the tunnel/bridge Oresund Fixed Link, which is expected to be commissioned in 2000 between Denmark and Sweden.

Another competitive threat to ports comes from alliances sharing land-side operations and constructing their own terminals at cheap locations, not necessarily within a port area. Ports will have to be smarter to attract the freight shipping companies into their ports.

4. Global information technology and infrastructure
4.1 Marine Marine Bunkerss buyers

Sophisticated and knowledgeable customers

At the moment there is a whole industry of brokers matching fuel oil to Marine Marine Bunkerss buyers. The Marine Marine Bunkerss buyers, of course, pay for this industry concealed in their purchase price although the Marine Marine Bunkerss supplier writes the cheque. As with every other marketplace, futures exchange or stock market, with time this process of matching buyer and seller will become more efficient, more electronic, more transparent and cheaper. Doubtless the most global and sophisticated brokers will survive and provide this service. Doubtless others will disappear.

The implication for the Marine Marine Bunkerss buyers is that they will be able to get prices and availabilities immediately; and even arrange a Dutch auction between suppliers with a couple of key strokes on their desktop PC. Perhaps the first to arrange an electronic Marine Marine Bunkerss broking exchange will be some of the largest shipping alliances themselves ?

Logistics operations may provide competitive advantage

It is not only cost leadership and global alliances which have made Marine Marine Bunkerss buyers more sophisticated. The availability of cheap global communication tools, computer controlled surveillance and satellite navigation have also contributed. Container logistics and information technology capability have become a real source of competitive advantage in determining the scheduling of the buyers' own operations. Access to supply price information in the next port and the rest of the voyage can also be instant and cheap.

Global offer of information/high tech products to Marine Marine Bunkerss buyers

In this new age of information technology it is hard to imagine ships without some degree of computer controlled electronic surveillance. Ship engine manufacturers are developing 'the intelligent engine'. Satellite navigation and communications are the norm these days.

Increasingly, in may industries electronic global communications provide a platform for buyers and suppliers. For example, Shell has used such systems for many years to provide its marine customers with a means of rapidly receiving lubricants analysis results, for use in our analysis data management system called RLA OPICA. This system may be located in the buyers head office and/or on the vessels.

4.2 Impact on Marine Marine Bunkerss suppliers

The best news about information technology is that it is cheap, quick and gives real time global access. No doubt, the use of this technology will become more common in the marine fuels business as suppliers seek to differentiate themselves. They may give a supplier, with the right system, the competitive edge they are seeking to ensure long term viability. What sort of information technology products could Marine Bunkers suppliers offer ?

• Offering Marine Bunkers buyers access to a system that would enable them to receive real time Marine Bunkers and barge availability, and other data, for various ports along the voyage
  
  
• Electronic collection of price data in different ports
  
  
• Electronic placement of nominations
  
  
• Provision of a full communication platform that could be used by the shipping company for communicating internally, and with the Marine Bunkers supplier.

Transparency of prices

New communication technology and real time selling information systems make it possible to obtain Marine Bunkers price information quickly anywhere: prices can be more transparent. Part of this transparency is currently hidden for those Marine Bunkers buyers who use brokers to collect this data for them. In such cases, the Marine Bunkers buyer does not always get the full picture from the broker. At worst the Marine Bunkers buyer will be advised of the total price for product including brokerage fee and not be aware of the net product price; some less reputable brokers may even try to get (less reputable) suppliers to compete on the basis of the commission they pay to the broker rather than the price the buyer receives ! These sorts of practices fortunately are waning rapidly with increasing market transparency and buyer awareness of them.

Quick levelling of world fuel prices

Increased transparency of Marine Bunkers prices may also mean that price differences between ports will become more visible to sophisticated buyers who can benefit directly. Price spikes resulting from supply and demand shocks will be more quickly resolved, which will leave less scope for arbitrage of marine fuels prices. This will result in some income changes for some of the Marine Bunkers suppliers, especially traders. In the longer term this may result in a rationalisation of the number of Marine Bunkers suppliers.

4.3 Impact on parts

Ship operators, burdened with the need to reduce costs have in many instances rationalised their arrangements for Agency services. Ships' Agents, in order to be competitive have also had to resort to IT systems for communications with their customers, the ship operator and the port authority.

It is not difficult to imagine this being taken a stage further where Port Authorities provide a facility that shows current and future port traffic and allows ship operators to book berthing slots and other services directly online. Ships could also access such a system so that ETAs could be modified and so on. Also, as port authorities become increasingly involved in enforcing international maritime laws, IT systems utilising global communications networks will enable them to track suspect vessels easily.

5. Increasing global regulation
5.1 Impact on Marine Bunkers buyers

The operations side of the Marine Bunkers industry has long been subject to wide variation in methods and standards. It has largely been left to the Marine Bunkers buyer to find out by experience which ports and suppliers are the best and which the worst. Increasingly, global regulation will drive towards industry standards, which will govern the operations of both ports and suppliers, and will reduce the inconsistency and uncertainty to which buyers are currently exposed.

The publication in 1998 of the ISO Technical Report, ISO/TR 13739. Petroleum products - Method for specifying practical procedures for the transfer of Marine Bunkers fuels to ships will probably be adopted as the industry reference for Marine Bunkers delivery operations. This will make it easier for the buyer to control the supplier and the port.

As the various MARPOL Annexes become ratified, suppliers and ports will need to work together to meet the requirements, and to provide the buyer with facilities e.g. for disposal of waste materials. Health, safety, and Environmental (HSE) legislation, currently only seen in the form of regional regulations, will become globalised, placing the onus on suppliers to provide buyers with information for handling fuels safely and without risk to people or the environment.

5.2 Impact on Marine Bunkers suppliers

Globalisation will impact on all Marine Bunkers suppliers. As the concept of using universal operating standards becomes established, even large, well established companies, will need to re-examine their working practices. Some may choose to go beyond the ISO requirements in order to demonstrate service differentiation. For some smaller suppliers however, ensuring compliance may mean investment, not only in equipment and facilities, but also in personnel training.

In addition to the number of Marine Bunkers fuel oil grades currently on offer, the requirements of the MARPOL air pollution. Annex will create a demand for parallel supplies of low sulphur Marine Bunkers fuel oil. For the supplier, this will require significant investment in additional segregated storage and handling, and perhaps delivery facilities. The buyer may also have to invest in separate tanks. If the low sulphur fuel supply/demand imbalance becomes untenable, the supply industry will be faced with having to invest several billion dollars in de-sulphurisation capacity. As the extent of the IMO-approved Emission Control Areas increases, competition between suppliers for acquisition of low sulphur fuel will intensify.

The impact of global HSE legislation will be to place responsibility for 'product stewardship' of the Marine Bunkers fuel oil supplied squarely in the hands of the supplier. In addition to guaranteeing compliance with the relevant product specification (e.g. ISO 8217 or BS MA100), the supplier will need to comply with any local, national, or international HSE laws. The supplier will have to generate, or buy access to, the required HSE data, and provide the buyer with written guidance on storage, handling, usage, spillage, and disposal. As part of global legislation, the supplier will also be required to provide the buyer with a 24 hour HSE 'Help' contact.

5.3 Impact on ports

Ports are required to provide safe berths or anchorages for vessels. Most large ports already have some facilities to accommodate disposal of ship-generated waste, either as oily wastes, or garbage. The MARPOL Convention will require that all ports make disposal services available. The reception and disposal of oily wastes may well be in partnership with a local Marine Bunkers supplier.

Of all port services, pollution response is perhaps the best known example to have benefited from a global approach. Global response organisations sharing experiences has led to well founded methods of dealing with oil spills being adopted worldwide. If globalisation in other areas of the Marine Bunkers supply industry produces tangible benefits of the same magnitude, then whilst life will be tougher for the supply business, the clear winner will be the Marine Bunkers buyer.

6. Future challenges on Marine Bunkers suppliers

So far I have been exploring the effects of each of the three globalisation forces in turn. Let me now summarise their impact from the point of view of the Marine Bunkers supplier, since that is the perspective of my part of the business. The requirements Marine Bunkers suppliers will have to meet to stay in business in the future are as follows.

6.1 Customer offer

1. maintaining competitive pricing, but doing so for products which are consistently of good quality.
2. finding innovative ways to reduce the overall Marine Bunkers-related costs of Marine Bunkers buyers. This is likely to involve both products and services.
3. the ability to develop and maintain relationships with Marine Bunkers buyers. These relationships will develop in sophistication, leading to long term partnerships.

6.2 Supply requirements

1. world-wide Marine Bunkers supply, both inside and outside ports.
2. adherence to port licences to operate, and in particular, high quality Marine Bunkers operations meeting the tougher port and global regulations.
3. a supply of low sulphur fuel oil.

6.3 Marine Bunkers suppliers' business

1. a dedicated, low cost sales operation.
2. being able to meet challenges of a business environment with transparent prices. In particular, this means being able to survive in an environment in which there is less scope for trading on the basis of price arbitrage.

7. Conclusion

The message is clear:

Competition amongst Marine Bunkers suppliers will remain intense. The threshold of competence will be progressively raised by the Marine Bunkers buyers and the ports. To remain above this threshold and maintain a viable long term presence in the business, innovation and work on customer relationships will be required.

The picture I have painted is of a demanding future for suppliers. Not all of them will meet the challenge. However those that do will have a chance to participate in a revitalised, quality business. Shell is ready for this challenge !

Jacksonville, Florida
In the port of Jacksonville, Florida, Plaza maintains one central location. Dockside fueling or deliveries by truck or barge are available.