There are an increasing number of startups trying to bring more transparency — and, dare I say it, disruption — to various element of sea freight or the shipping industry. These include Freightos, the well-funded freight marketplace and freight-forwarding quote price comparison site, and, more recently, Shipamax, which is trying to drag bulk shipping into the digital age.
Now we can add BunkerEx to the list, a newly funded startup out of London that is building an online marketplace to change the way shipping companies buy fuel, or ‘bunkers,’ to use the correct industry term. In what is being described as a “pre-seed” round, the company has raised £400,000 from early-stage investor Seedcamp, and the taxpayer-funded London Co-Investment Fund, along with a number of unnamed angel investors.
“I’ve been in the oil and shipping industry for nearly ten years now, most recently working four years at the largest bunker trader in the world,” BunkerEx co-founder and CEO Ishaan Hemnani tells TechCrunch. “That’s really where I learnt the ropes of this opaque industry and saw first-hand how a lack of transparency was significantly costing shipping companies”.
To put into context how opaque the buying and selling of bunkers is, Hemnani says that currently most shipping companies go to brokers to buy fuel for their ships in the same way you might use a mortgage or insurance broker, but with a key difference: the bunker market is entirely unregulated.
The result is that “brokers don’t choose vendors objectively but instead based on their own relationships,” meaning that although brokers should be acting in the interest of buyers (i.e. the shipping companies), they often give them a higher price in order to increase commissions.
“Shipping companies never see the conversations between their broker and the supplier, and this ultimately costs them,” he says.
To address this, BunkerEx operates an online marketplace that matches supply and demand in a more direct way, bypassing traditional bunker brokers, even if in some says it also resembles one itself (the startup’s website even uses the tagline “The world’s most transparent bunker broker”).
Explains Hemnani: “We’ve built a marketplace where buyers post their request on the site, and based on several parameters, such as the port, dates and fuel type, we show them a full list of our verified suppliers. They can then send the request to all suppliers in one click, who get invited into a live auction to openly compete for the deal. It’s like Alibaba for bunker fuel!”.
All offers are then transmitted in real-time, and once the buyer sees an offer they like, they accept it and the auction for that request ends. Noteworthy, suppliers are kept anonymous to each other and buyers can also give a counter price to all suppliers at once as leverage on a first to accept wins basis.
“Besides the monetary benefits, there’s also a huge amount of time saved as a buyer can reach out to a large number of suppliers and fix a deal in minutes,” adds the BunkerEx CEO. “Traditionally this is all done over instant messenger (such as Skype Chat, although it used to be Yahoo! Messenger) so there is a lot of back-and-forth on different chat windows. We estimate that our platform saves a buyer an average of 40 minutes per deal”.
Meanwhile, I’m told that a total of 400 million tonnes of fuel is delivered to ships every year, so BunkerEx is going after a potentially huge market. Repeat business shouldn’t be an issue either, with shippers typically needing to refuel vessels several times per week.
And despite going up against traditional bunker brokers, Hemnani explains that BunkerEx hasn’t ditched an important element of what they offer, which is ensuring the quality and reliability of fuel suppliers. “Ultimately fuel is pumped onto a ship and a lot can go wrong with the delivery, so we still employ experts who are on call for our clients 24/7 to deal with any issues. That way we offer shipping companies all the benefits of using a broker, without having to pay the price for it,” he says.
To that end, BunkerEx says it charges a fixed commission to the supplier but doesn’t charge the buyer anything. Furthermore, that commission is said to be 80 per cent less than the fee a traditional bunker broker takes, with these savings returned back to the buyer. “Keep in mind that fuel makes up approximately 70 per cent of the cost of a voyage, so there’s a large incentive to reduce these costs,” adds Hemnani.