Europe 0.5% sulfur bunker fuel demand reaches tipping point
The European bunker market is reaching a tipping point as sales volumes of IMO-compliant 0.5% sulfur fuel oil blends reach around the same level as those of the hitherto prevalent 3.5% S RMG 380 blend ahead of IMO 2020, market sources said.
The new 0.5% sulfur fuel oil blends account for between 40% and 50% of fuel oil bunker sales at the European bunkering hub of Rotterdam, a Northwest Europe supplier said.
“High sulfur fuel oil is a nightmare, it is still quite difficult to buy product and now the focus is much more on very low sulfur fuel oil,” the supplier said.
The balance between the two was between 40-60 and 50-50 and changing with each week, the supplier said.
“Every day there is less HSFO sold and more VLSFO so by the end of the month it will be about 70-30,” the supplier added.
Other Rotterdam-based suppliers said the balance between the fuels was 50-50. A European bunker buyer also put the current balance of 0.5% and 3.5% S fuels at 50-50.
In the western Mediterranean, a similar pattern was developing, with sales of 0.5% sulfur fuel oil only slightly less than those of 3.5% sulfur fuel oil, a Mediterranean supplier said.
HSFO DOMINATES BARGE MARKET
The transition in the bunker market appears to be one step ahead of that in the barge market.
Some 28,000 mt of VLSFO traded in the Platts European Market on Close assessment process since the assessment launched in January, which included 13 traded offers, compared with one traded bid. There were 13 trades in October, compared with one in September.
There have been various market participants in the Platts MOC, with numerous bids and offers left outstanding at the close of the trading window.
The 0.5% FOB Rotterdam barge market was assessed at $459.25/mt Wednesday, a $245.75/mt premium to 3.5% FOB Rotterdam barges and a discount of $127.25/mt to ICE low sulfur gasoil futures.
Fuel oil volumes traded in the Platts MOC for 3.5% FOB Rotterdam barges were up 51% month on month in October, with market participants saying there was tight prompt availability, continuing the market backwardation.
Some 622,000 mt traded in the Platts MOC last month, the highest since June, compared with 412,000 mt in September and 546,000 mt in August. Traded volumes in October 2018 totaled 362,000 mt.
Shipowners are looking to use up high sulfur bunker fuel to avoid high costs, including rising freight rates as well as wide spreads between 0.5% and 3.5% FOB Rotterdam barges.
The bunker industry is counting down the days to January 1, 2020, when ships will no longer be able to burn 3.5% S fuel oil on the high seas, unless they have an exhaust gas cleaning system — or scrubber — fitted, as decreed by the International Maritime Organization.
S&P Global Platts assessed 0.5% sulfur marine fuel oil at $497/mt delivered Wednesday, compared with $250/mt delivered for 3.5% sulfur 380 CST fuel oil.
The higher price of 0.5% sulfur marine fuel is still below that of marine gasoil, which was assessed Wednesday at an $80/mt premium over 0.5% sulfur delivered fuel oil. This trend seems to have blunted an anticipated rise in demand for MGO.
“The vast majority (69.6%) prefer purchasing VLSFO over [marine gasoil],” a survey of bunker buyers by supplier Monjasa found.
A minority, 8.7%, can rule out placing orders for VLSFO in 2019, Monjasa said.
The number of ports supplying 0.5% S marine fuel has continued to grow, although Turkish refiner Tupras said that it does not plan to produce 0.5% S marine fuel.