Asia's thirst for HSFO remains unquenched amid thrust for cleaner fuels
20th August 2021 08:08 GMT

Contrary to initial expectations, Asia's high sulfur fuel oil market is witnessing a resurgence in demand for HSFO marine fuel as many smaller ports and bunker players start to offer this grade given, among other factors, a favorable Hi-5 spread, which has lured shipowners to install scrubbers.

This unquenching thirst for HSFO comes despite the big push for cleaner fuels following the International Maritime Organization's global sulfur mandate for marine fuels and its impending rules relating to decarbonization.

In Singapore, the world's largest bunkering port, HSFO bunker sales, which includes 180 CST, 380 CST and 500 CST bunker fuel grades, were mostly steady on the month in July, but rose almost 7% year on year to 1.06 million mt, contributing about 26% to total marine fuel sales, latest data from the Maritime and Port Authority of Singapore showed. Singapore's January-July HSFO sales had jumped 33.7% compared with the same period a year earlier.

“We are seeing a pick up in inquiries from shipowners for HSFO bunkering at Singapore as there is tight availability at Fujairah, coupled with competitive delivered HSFO pricing at Singapore," a Singapore-based trader said.

The discount for Singapore-delivered 380 CST HSFO to that of Fujairah widened from the July average of $6.82/mt, to average minus $15.83/mt over Aug. 1-19, Platts data showed.

Singapore's August HSFO bunker sales will likely be similar, or even slightly better, than July, a market source said.

Ports in nearby India and Sri Lanka have also seen a marked increase in inquiries, and are trying to emulate Singapore's HSFO success by ramping up offers as demand for the grade accelerates.

“HPCL is offering HSFO 380 CST at Mumbai, Kochi, Kandla and Vizag [Visakhapatnam] with fine avails," a company source told Platts.

"Compared with last year, we are experiencing almost double the orders for HSFO, mainly from scrubber-fitted container vessels. There are three to four big inquiries," he added.

At Kochi, HSFO demand stands at around 2,000 mt/month, a Mumbai-based bunker trader said. This is after a long hiatus as there were no HSFO availabilities in the last four to five months, he added.

In Sri Lanka, Advantis Bunkering became the first supplier of delivered HSFO at Colombo port, banking on a long-term increase in port calls by scrubber-fitted vessels, a company source said recently. Advantis had received "multiple inquiries" from major shipping companies since launching delivered HSFO sales, he said.

Advantis has secured a sale for 1,200 mt to be delivered between Aug. 25 and Aug. 30, another company source said. "Demand is picking up given the firm inquiries that are coming in.”

Meanwhile, a physical bunker supplier with a substantial market share at the port of Colombo said that a plan to offer delivered HSFO is “currently in the works”.

Scrubbers’ uptick brightens HSFO outlook

The continued installation of exhaust gas cleaning systems, or scrubbers, is supporting HSFO demand, industry sources said.

Increasing familiarity of the technology and clarity of its benefits in tackling GHG emissions has diminished the initial skepticism shrouding its use.

According to the Clean Shipping Alliance, a recent study by CE Delft, a research and consultancy firm, found that the increase in CO2 footprint from the additional refining of marine gasoil to likely be in the range of 10%-15% and potentially as high as 25%. By contrast, the increased CO2 from EGCS is only in the 1%-1.5% range. Furthermore, the EGCS technology achieves much lower sulfur output than required by the IMO 2020 rule, it added.

While companies are eager to use low carbon fuels when they become available for sustainable shipping, scrubber technology remains a key component in meeting the 2030 milestone, S&P Global Platts Analytics said earlier this month.

The current scrubber fleet numbers about 4,500, but if clean alternative fuels do not achieve adequate penetration by 2030, this number could escalate to close to 7,000, Platts Analytics estimated.

Meanwhile, the price differential between HSFO and Marine Fuel 0.5% sulfur, also known as the Hi-5 spread, has also favored the use of this technology.

In Singapore, this spread averaged $298.90/mt in January 2020 as the market transitioned to the IMO 2020 mandate. It narrowed to average as low as $60.32/mt in September 2020, but recovered to average $103.33/mt in January 2021, according to Platts data. This year up until July, the spread has, on a monthly basis, averaged mostly over $100/mt, and $111.44/mt over Aug. 1-19.

 


Bunkerworld .,
20th August 2021 08:08 GMT