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GLOBAL: Recovery position
Written by Lesley Bankes-Hughes
Parent Category: Subscribers' News Board
Category: Global
Published: 22 February 2019
Created: 22 February 2019
Last Updated: 22 February 2019
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Bunker spot talks to Aegean Marine’s Tyler Baron and Sal Drago about the company’s future after it emerges from Chapter 11 reorganization – and a rebranding is on the cards.
In light of its recent tribulations, Aegean has been compelled to become a leaner operation. So, after it comes out of Chapter 11, which is anticipated to happen next month, what can we expect the ‘new’ Aegean to look like? Sal Drago, Director of Global Trading, is extremely bullish about the company’s ability to return to its former position as a market leader.
‘I think our platform is one of growth – obviously there will be some areas where there will be some synergies [with Mercuria] that we will take advantage of, but our proposition here is to grow the business further.
‘We have gone for some time now as Aegean “surviving”, and now it is time for more “building”. Mercuria has access to additional barrels and a vast customer relationship across all sorts of bunkering locations – we want to build on that.’
Tyler Baron, Aegean Marine board member, is equally positive about the prospects for a rejuvenated Aegean: ‘From a customer and supplier perspective, Aegean will become one of the best counterparties in the industry in just a couple of months’ time.’
The company’s footprint and physical assets will be the same, he says, pointing to Aegean’s 41-strong barge fleet and terminal facilities. He also references its existing client relationships which, he emphasises, have remained strong in spite of recent events.
According to Baron, sales volumes have been building steadily since last summer, with a not surprising brief hiatus when the company entered Chapter 11 protection.
Since November, sales have strengthened month on month, and ‘we are increasingly pulling vessels into port locations where volumes are really recovering.’
The first step back to financial stability and growth is to optimise Aegean’s existing network. Beyond that, ‘Mercuria’s supply capabilities are both going to enhance our current markets and obviously provide further tools to help our customers in 2020,’ he says, ‘but they will also open up new markets.’
And could those markets perhaps include a return to the world’s largest bunker hub?
Drago doesn’t say that taking a physical position in the Singapore market is already on the cards, but he also doesn’t rule it out. ‘Mercuria has a fairly large position in Singapore – it does quite a bit of volume through there, mostly ex-wharf.
‘So, the answer is that it is something we most definitely will look at and, yes, the opportunities are certainly there.’
Although Aegean’s acquisition by Mercuria has been result of unhappy circumstance, there is a certain irony in the outcome in the light of current, wider market changes in response to the impact of IMO 2020. With fuel buyers seeking to access a range of compliant fuels across their vessel trades, including the new 0.50% sulphur blended fuels, and suppliers eager to score a competitive edge by sourcing good quality, compatible products and assuring availability throughout their port networks, the supplier profile is changing in the bunker industry.
The majors and the large commodity traders, with ready access to compliant products, are taking a
strong – and highly visible – position in the supply space (potentially at the expense of smaller, independent suppliers), so Aegean’s ‘alliance’ with Mercuria could be seen as, somewhat serendipitously, fortuitous.
As Sal Drago comments: ‘I would say that we have basically come full circle; if you go back 10-15 years, the market was dominated by the majors and large companies and we went from that to smaller, independent companies – and the rise of a few of our current competitors.
‘Then we went back to trading companies, and I think that we are now going to a time where only well capitalised companies with the logistics and the blending know how, and assets such as tanks and terminal blending capabilities, will succeed – particularly around 2020, when that will be a must.
‘The majors have come back to the bunker space and the major trading companies, like Mercuria. I cannot speak for Mercuria, but I think that is exactly what they are seeing – the smaller marginal players will not be able to compete in the 2020 world.’
Echoing the view of many suppliers, Drago sees that many in the shipping industry are just now putting their 2020 compliance strategies in place, but he is adamant that Aegean will be able to cover market demand – however it plays out.
‘We will be very ready for 2020, especially with the support of Mercuria [in terms of] the assets they bring to the table and access to additional barrels. ‘The key is to have access to all three grades: the 0.50% sulphur fuel oil, which will be the hottest commodity initially, followed by the diesel blended fuels, and then the high sulphur.
Should the Chapter 11 restructuring proceed as anticipated, Aegean will be back in business at full tilt some nine months after facing the prospect of imminent liquidation. But does the Aegean name carry negative legacy connotations given, for example, the alleged involvement of some of its former management and employees in fraudulent activity?
Baron is circumspect on how the operations of Mercuria’s bunkering arm, Minerva, will sit with Aegean’s activities going forward, but on the subject of the longevity of the Aegean name, he reveals: ‘There will be a rebranding, so stay tuned on that front – there are active discussions on that topic as we speak.’
This is an extract from an extensive interview with Tyler Baron and Sal Drago by Bunkerspot Editor Lesley Bankes-Hughes, which is published in the February/March issue of Bunkerspot magazine.
