Competition heats up for bunker sales among Asian ports amid weak demand
5th August 2022 10:25 GMT

 

Competition among Asian bunkering ports, especially Singapore, Zhoushan, Hong Kong and South Korea, for bunker fuel sales has heated up due to weak demand and increasing supply, bunker industry sources said in the week starting Aug. 1.

 

Bunker demand in Asia, especially in China, has weakened amid lockdown and recession, trading sources said. "China's iron ore imports are declining. Lockdown is one of the reasons for weak bunker demand," a source at a trading house said.

At the same time, Chinese domestic refineries have been increasing low sulfur bunker fuel production since the Chinese government issued new export quotas in early July, oil traders said. With refining margins for LSFO strong, Chinese refiners are actively producing the grade, a fuel oil trader said.

Weak demand and rising supply have cut the bunker premium at Zhoushan. The delivered Zhoushan marine fuel 0.5%S bunker premium stood at $46.98/mt on Aug. 1, the lowest since April 25, S&P Global Commodity Insights data showed.

While prices at China's largest bunkering port declined, prices at other neighboring ports also started to weaken.

"Hong Kong has to compete with Zhoushan, Singapore and Korea. And I can say [very low sulfur fuel oil] is in abundance in Hong Kong," a Hong Kong-based bunker supplier said.

A Hong Kong-based bunker trader said Hong Kong was in the same situation as Zhoushan. "Demand is weak and the market is dropping," the trader said. "A lot of suppliers have been eager to sell bunker fuel [in Hong Kong]."

Bunker prices in South Korea have also been weak amid poor demand and rising supply. "Since crack margins for gasoline collapsed, refiners want to make more [low sulfur] fuel oil," a bunker trader at a South Korean trading house said.

Traders in Singapore also expect greater availability of LSFO cargoes in August to meet the downstream demand, while the healthier inventory levels are also likely to weigh on bunker prices and narrow delivered price spreads against competing ports across Asia.

On the other hand, softening crude oil prices in recent days have also led shipowners to seek requirements at Singapore, the world's largest bunker hub, more actively than before, according to market sources.

As a result, marine fuel 0.5%S bunker premiums over Singapore marine fuel 0.5%S cargoes plunged in the week starting Aug. 1. The Hong Kong delivered bunker premium to Singapore cargoes fell to $60.59/mt on Aug. 4, the lowest since May 23, S&P Global data showed. Singapore's bunker premium to cargoes also dropped to $55.61/mt on Aug. 4, the lowest since May 23, according to the data.

South Korea's bunker premium dropped to $89.03/mt on Aug. 2, the lowest since July 13, before it gained to $93.84/mt on Aug. 4, S&P Global data showed.

As the leaner LSFO inventories over recent months elevated delivered premiums and curbed bunker demand at the port of Singapore, sales volumes in August are still largely contingent on prices at neighboring ports, though the easing bunker premiums buoyed market sentiment, sources said.

Platts Singapore-delivered marine fuel 0.5%S bunker premium over the benchmark FOB Singapore Marine Fuel 0.5%S cargo assessments slipped to an average of $60.85/mt Aug. 1-4, from $104.08/mt in July, according to the latest data from S&P Global.


Platts ,
5th August 2022 10:25 GMT