German HSFO bunker premium to Rotterdam reaches all-time high on supply tightness
11th May 2022 16:08 GMT

High sulfur fuel oil (HSFO) delivered to Hamburg was assessed at its highest ever premium to Rotterdam May 10, as tightening supply saw the spread climb to $90/mt.

Prices in Rotterdam and Hamburg have historically closely tracked one another, however the link between the ports has broken in recent weeks due to a change in supply dynamics. Rotterdam HSFO prices have fallen as availability has gradually improved, while the German outlook remains bullish on tightening supply.

Delivered bunker fuel in Hamburg was assessed at $696/mt May 10, while delivered Rotterdam material was assessed at $606/mt, according to S&P Global Commodity Insights. The premium for Hamburg high-sulfur fuel increased 5.8% on the day and 20% on the week.

Prior to 2022, the largest spread between the two ports was $49/mt in 2019.

German suppliers have reported increasing difficulty securing HSFO supply as the market has moved to shun Russian product ahead of new EU sanctions.

Russian material made up over 95% of HSFO imports to Germany in 2021, compared to an 80% Russian share of imports to Amsterdam-Rotterdam-Antwerp the same year, Kpler shipping data showed.

“There is no improvement in availability for HSFO, procuring a cargo is difficult”, said one German trader. “Our customers now have switched to burn VLSFO because there is no other option left”, he said.

One shipping source commented that prompt availability in Hamburg had been problematic, and suppliers had only been offering on firm requirements due to issues finding non-Russian supply.

“I think that we are only starting to see the knock-on effects now, and the next few months will certainly see tight avails and higher premiums ahead,” he said.

While Germany appears to be strictly adhering to trade restrictions banning Russian imports which are not strictly necessary after May 15, more Russian product has continued to find its way into Amsterdam-Rotterdam-Antwerp ports.

Germany has no new HSFO imports scheduled for May, whereas Kpler showed 3.35 million barrels of Russian HSFO imports set to arrive in Amsterdam-Rotterdam-Antwerp in the month ahead.

One supplier commented that arbitrage opportunities from Rotterdam have been limited by stringent European customs regulations, which hinder the speed with which new supply can be brought online.

Suppliers have instead been forced to reply upon production by German refineries, which have greater incentive to produce higher-margin bitumen in the summer months.

“This is all coming at a time when we’ve seen higher demand volumes due to cruise season. Voyages are now operating at full capacity for the first time in years,” said one local bunker supplier.

“We are waiting for new supply from local refineries but fully expect the situation to remain difficult for the next three to four months,” he said.

Bunkerworld .,
11th May 2022 16:08 GMT