Bunker sales competition to heat up in Shanghai, Guangzhou on new deregulation
10th December 2021 10:11 GMT

 

Beijing's recent move that allowed Shanghai and Guangzhou to approve bunker suppliers is going to heat up competition to sell bunker fuel at those ports and lead to a decline in bunker prices, industry sources said in the week that began Dec. 5.

 

The Chinese government allowed Shanghai and Guangzhou to approve bonded bunker suppliers at those ports, a government website showed Nov. 25. Currently, five bunker suppliers are allowed to sell bonded bunker fuel at those ports. These companies -- such as China Marine Bunker Supply Co, or Chimbusco, and Sinopec Zhejiang Zhoushan Petroleum, or Sinopec Zhoushan -- have the license to sell bonded bunker fuel across the country.

Industry sources expect more bunker suppliers could get approval to start business at these two ports in the first half of 2022.

This new policy is like creating a second and third Zhoushan, said a bunker supplier in China.

In Zhoushan, more than 10 bunker suppliers have the license to supply bonded bunker fuel, including five nationwide bunker suppliers. With more suppliers than other ports, bunker fuel prices at Zhoushan are typically the lowest in China.

The government's move is likely to expand the bunker market in Shanghai and Zhoushan. The incremental supply increase will come from domestic refineries, not imported cargoes, said a fuel oil trader at a Chinese company.

 

Disadvantage to private companies

 

Shanghai and Guangzhou governments are likely to give private companies the bunker license, market sources said. As private companies don't have access to low-cost domestically-produced low sulfur fuel oil, they may be forced to engage in a hard-fought struggle, the sources said.

"It is a losing business for us, private firms can only rely on imports for bonded bunkering without any strength to compete with the state-owned oil giants," a Guangzhou-based private fuel oil importer said, adding that the company has no interest in applying for a license.

"Sinopec and PetroChina have domestic supplies. And as big state-run companies, they have good financial support to expand their market share, little room for other suppliers to survive," a second Guangzhou-based bunker trader said.

Sinopec holds China's 59% of bunker fuel oil export quota for 2021, while PetroChina holds 29%, S&P Global Platts data showed.

In China, only the quota holders are allowed to send tax-free domestically-produced bunker fuel oil to China's bonded ports to supply to ships plying international routes.

 

Competition inside China

 

Moreover, neither Shanghai nor Guangzhou can compete with Zhoushan in the bonded bunkering business, the Guangzhou-based bunker trader said. Zhoushan aims to develop to be a top bunkering hub in Asia and set Singapore as its target.

As Singapore-delivered low sulfur fuel oil bunker prices pull further away from that of Zhoushan's, shipowners, especially from the container and dry bulk shipping segments, are increasingly diverting their bunker requirements to Zhoushan instead, Singapore-based traders said.

The east China city of Zhoushan cuts income tax and fee for bunkering firms, while simplifying administrative processes and tightening fuel quality control checks. These efforts lead to competitive bunker prices and reliable quality.

Zhoushan has also improved its one-stop service chain for vessels that offers ship repairing and goods and supplies for crews, which can prove attractive for international vessels.

Different from Zhoushan, which relies on the petroleum and chemical industries to drive its economy, "Shanghai and Guangzhou are unlikely to pay more attention to developing bunkering business. These two first-tier cities have too many industries to drive economy, finance, manufacturing, internet technology and international trading," the trader said.


Bunkerworld .,
10th December 2021 10:11 GMT