The final quarter of 2019 marked
a massive decline of high-sulfur fuel oil (HSFO) sales as the industry
transitioned into compliance with the IMO 2020 sulphur cap, according to
international shipping association BIMCO.
a massive decline of high-sulfur fuel oil (HSFO) sales as the industry
transitioned into compliance with the IMO 2020 sulphur cap, according to
international shipping association BIMCO.
In Singapore, the world’s largest
bunkering hub, the bunker sale landscape saw significant change as the sale of
HSFO dropped in a matter of months. In contrast, the sale of low-sulfur fuels
skyrocketed in the final quarter.
bunkering hub, the bunker sale landscape saw significant change as the sale of
HSFO dropped in a matter of months. In contrast, the sale of low-sulfur fuels
skyrocketed in the final quarter.
The first wave of IMO2020
preliminary estimates from the Maritime and Port Authority of Singapore (MPA)
indicates that a total of 4,465 thousand tons were sold in December 2019, a 4%
increase compared to December 2018 and the highest sale of bunker fuel sold in
Singapore since January 2018.
preliminary estimates from the Maritime and Port Authority of Singapore (MPA)
indicates that a total of 4,465 thousand tons were sold in December 2019, a 4%
increase compared to December 2018 and the highest sale of bunker fuel sold in
Singapore since January 2018.
Sales of low-sulfur fuels,
including LSFO and MGO LS, rose by 51% month-on-month in December to 3,127
thousand tons, compared to the 1,271 thousand tons of HSFO sold in the same
month.
including LSFO and MGO LS, rose by 51% month-on-month in December to 3,127
thousand tons, compared to the 1,271 thousand tons of HSFO sold in the same
month.
“The shipping industry has been
riddled with market uncertainty in recent months but the bunker sales in the
port of Singapore provide one of the first readings as to how the industry has
transitioned into compliance with the IMO2020 regulation,” Peter Sand, BIMCO’s
Chief Shipping Analyst, commented.
riddled with market uncertainty in recent months but the bunker sales in the
port of Singapore provide one of the first readings as to how the industry has
transitioned into compliance with the IMO2020 regulation,” Peter Sand, BIMCO’s
Chief Shipping Analyst, commented.
“We have now surpassed the first
wave of IMO2020 and hopefully the accompanying market uncertainty will diminish
as we proceed into 2020.”
wave of IMO2020 and hopefully the accompanying market uncertainty will diminish
as we proceed into 2020.”
The shift in bunker sales
In December, a total of 2,630
thousand tons of LSFO were sold, accounting for 59% of total sales. This is a
massive change considering that it accounted for roughly 1% of total sales in
the last 2 couple of years.
thousand tons of LSFO were sold, accounting for 59% of total sales. This is a
massive change considering that it accounted for roughly 1% of total sales in
the last 2 couple of years.
However, the total 2019 bunker
sales in Singapore were down 4% year-on-year, the lowest level since 2015.
sales in Singapore were down 4% year-on-year, the lowest level since 2015.
The December figures provide
insight into the IMO2020 transition and how the upcoming year might unfold. At
the start of 2019, low-sulfur fuels accounted for a mere 8% of total sales
compared with a jump to 70% in December.
insight into the IMO2020 transition and how the upcoming year might unfold. At
the start of 2019, low-sulfur fuels accounted for a mere 8% of total sales
compared with a jump to 70% in December.
“The massive uptick in market
share of low-sulphur fuels illustrate the first wave of IMO2020, but BIMCO does
not necessarily expect the low-sulphur to high-sulphur sales ratio to remain at
these levels in the coming year,” the association added.
share of low-sulphur fuels illustrate the first wave of IMO2020, but BIMCO does
not necessarily expect the low-sulphur to high-sulphur sales ratio to remain at
these levels in the coming year,” the association added.
While low-sulfur fuels have
gained the largest market share, it is worth noticing how HSFO still accounts
for 28% of total sales, driven by bunkers purchased for scrubber-fitted ships.
Many of the scrubber-fitted ships are also the largest types of ships consuming
relatively more fuel, which will surely facilitate stable demand for HSFO.
gained the largest market share, it is worth noticing how HSFO still accounts
for 28% of total sales, driven by bunkers purchased for scrubber-fitted ships.
Many of the scrubber-fitted ships are also the largest types of ships consuming
relatively more fuel, which will surely facilitate stable demand for HSFO.
The bunker market in the port of
Rotterdam, approximately one-sixth of the size of the Singaporean market,
exhibited the same trend in November. Here, the sale of HSFO declined
substantially while low-sulfur fuels rose to 50% of total bunker sales.
Rotterdam, approximately one-sixth of the size of the Singaporean market,
exhibited the same trend in November. Here, the sale of HSFO declined
substantially while low-sulfur fuels rose to 50% of total bunker sales.
The shift in bunker sales
underlines the massive transition that the shipping industry has been faced
with at the turn of the decade. For the first wave of the transition, the
global fleet seems to have bunkered sufficiently. A second wave is expected to
set into motion once the fleet has burned through the initial supply of
low-sulfur fuels.
underlines the massive transition that the shipping industry has been faced
with at the turn of the decade. For the first wave of the transition, the
global fleet seems to have bunkered sufficiently. A second wave is expected to
set into motion once the fleet has burned through the initial supply of
low-sulfur fuels.
VLSFO – the silver bullet for
IMO2020?
IMO2020?
An array of different compliant
distillates has emerged in the market to facilitate compliance.
distillates has emerged in the market to facilitate compliance.
While the IMO2020 sets out a
regulatory framework for the shipping industry, it does not issue mandatory
uniform requirements for the properties of distillate blends. To some degree,
this contributes to the uncertainty regarding bunker incompatibility.
regulatory framework for the shipping industry, it does not issue mandatory
uniform requirements for the properties of distillate blends. To some degree,
this contributes to the uncertainty regarding bunker incompatibility.
As explained, two different fuel
blends with the same specifications are not necessarily compatible. Bunkering
VLSFO from a bunker supplier in one port is not necessarily compatible with
VLSFO bunkered in another.
blends with the same specifications are not necessarily compatible. Bunkering
VLSFO from a bunker supplier in one port is not necessarily compatible with
VLSFO bunkered in another.
VLSFO has been labeled as the
silver bullet for the IMO2020 market. Yet, up until the fourth quarter of 2019,
VLSFO was only available in a few select ports, but at an attractive price
discount to MGO LS.
silver bullet for the IMO2020 market. Yet, up until the fourth quarter of 2019,
VLSFO was only available in a few select ports, but at an attractive price
discount to MGO LS.
However, In December 2019, the
MGO LS and VLSFO reached price parity in Singapore, seemingly on the back of
higher demand for VLSFO.
MGO LS and VLSFO reached price parity in Singapore, seemingly on the back of
higher demand for VLSFO.
The rising cost of low-sulfur
fuels illustrates the massive challenge that shipowners have been faced with
overnight. At current price spreads, fuel oil costs have effectively doubled,
putting heavy financial pressure on companies that must bear the cost burden
themselves.
fuels illustrates the massive challenge that shipowners have been faced with
overnight. At current price spreads, fuel oil costs have effectively doubled,
putting heavy financial pressure on companies that must bear the cost burden
themselves.
The first-mover advantage associated with scrubbers seems to hold
true for the time being, according to BIMCO.
true for the time being, according to BIMCO.
“Almost from one day to another,
IMO2020 has resulted in a massive increase in bunkering costs for shipowners
and operators, costs which for many companies cannot be sustained for a
prolonged period.
IMO2020 has resulted in a massive increase in bunkering costs for shipowners
and operators, costs which for many companies cannot be sustained for a
prolonged period.
“Shipowners are trying to pass on the additional costs of
bunkering to customers, but if the underlying supply and demand fundamentals
are not balanced, their efforts may prove futile,” Sand continued.
bunkering to customers, but if the underlying supply and demand fundamentals
are not balanced, their efforts may prove futile,” Sand continued.
While the industry adjusts to the
new reality of IMO2020, another crucial part of the regulation is approaching
hastily.
new reality of IMO2020, another crucial part of the regulation is approaching
hastily.
On March 1, 2020, the
high-sulfur fuel oil carriage ban takes effect, which prohibits ships without a
scrubber to even carry bunker fuels with sulfur content above 0.50%.
high-sulfur fuel oil carriage ban takes effect, which prohibits ships without a
scrubber to even carry bunker fuels with sulfur content above 0.50%.
World Maritime News.
