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INTERVIEW: Monjasa sees potential for shifting trade flows on Ukraine fallout
7th April 2022 17:11 GMT

Shipping routes and traffic at bunker ports could change due to shifts in commodity flows following Russia’s invasion of Ukraine, Svend Stenberg Molholt, group COO of bunker supplier Monjasa, said in an interview April 7.

The war in the Black Sea has disrupted trade from the region and pushed shipping markets towards other ports and routes to bring key commodities to consumers.

This effect has so far been limited and diffused but has the potential to build as shippers avoid Russia and areas directly impacted by the conflict, such as Ukraine’s coastline. “We see that global trade and vessels are trading more in other areas across the world,” Molholt told S&P Global Commodity Insights.

While the effect of this is not yet significant, there is room for it to grow, he said.

“It may be that longer term impacts completely change some trading flows… but I think everyone is sitting on the fence right now in terms of the longevity of the war and prices,” Molholt said.

A range of commodities are affected. Ukraine and Russia were key exporters of wheat, with both accounting for a combined 23% of global wheat trade in the 2021-22 marketing year, according to the US Department of Agriculture. However, dry bulk carriers are now turning to places like Argentina to secure volumes.

In oil markets, Russia’s crude oil exports typically amount to about 4.6 million b/d, with 2.5 million-2.8 million b/d heading to Europe, 1.5 million b/d to Asia, and 210,000 b/d to the US, according to analysts at S&P Global.

Of this, about 750,000 b/d goes via pipeline to Europe and 600,000 b/d via pipeline to China, leaving around 3.2 million b/d to travel by sea.

The US, UK and Canada have banned imports of Russian oil and the European Union said April 6 that it was “working on” a ban on Russian oil imports.

 

Tighter bunker markets

 

Russia is a major contributor to worldwide marine fuel markets. The country supplies around 20% of global bunker fuel, including 0.5% sulfur fuel oil, 3.5% sulfur fuel oil and marine gasoil, tanker firm Euronav said in its 2021 report earlier in April.

Limited access to these oil products has prompted rising prices. S&P Global assessed the 0.5% Rotterdam barge front month crack at $9.97/b April 6, down from a two-year high in March but still high compared to the previous year. Traders attributed the firm crack to a lack of Russian product.

Monjasa is managing the shortage in product by building on its relationship with its suppliers, Molholt said.

It is hard to pinpoint which market is particularly affected as Russian oil has been a component of more or less all markets, which are all impacted “in some shape or form,” he said.

Monjasa sold 5.7 million mt of bunker fuel in 2021, the company’s annual report showed April 7, up 16% on the year, with the Americas accounting for 34% of 2021 volumes, West Africa for 19%, Europe and Southeast Asia for 16% each and the Middle East for 15%.

In its first complete group carbon accounts, the company reported that CO2 emissions rose 17% on the year to 22.19 million mt of CO2 equivalent.

 

Future fuels

 

The pace of energy transition in the shipping industry is picking up fast as the International Maritime Organization-mandated carbon efficiency targets kick in in 2023. With other decarbonization goals in place for 2030 and 2050, companies are required to invest in vessels that can burn sustainable fuels.

Monjasa distinguishes between short-term and long-term decarbonization options. “In the short term we are already looking at different biofuel specifications and demand outlets, where we can provide a real logistical difference,” Molholt said.

Biofuels have the advantage of being burnable in existing ships’ engines but, with limited feedstock, competition for biofuels will be tough, not least as shipping must compete for them with other sectors such as aviation.

This is reflected in prices. S&P Global assessed FAME 0 (RED) FOB ARA at $1,935.50/mt April 6. The biodiesel price compares to a delivered price for 0.5% sulfur fuel oil at Rotterdam of $846/mt.

In terms of investing in provision for new fuels, building infrastructure at the larger bunker hubs such as Singapore is the most attractive course of action as there is a predictable flow of business and a long-term perspective, Molholt said.

Looking further ahead, there is likely to be a multiplicity of future fuels and methanol and ammonia have attracted considerable attention.

Monjasa is agnostic about which fuel will take off and doesn’t yet have clarity on the fuels’ respective futures but is engaged in different partnerships as it looks at the logistics of enabling the fuels, Molholt said.


Bunkerworld .,
7th April 2022 17:11 GMT