Two weeks into the new low sulphur fuel regime introduced by IMO and the indications are there has been a swift uptake in low sulphur marine fuel
The final quarter of 2019 marked a massive decline of HSFO sales, as the industry transitioned into compliance with the IMO 2020 sulphur cap (IMO2020). In Singapore, the world’s largest bunkering hub, the bunker sales landscape saw significant change as sales of high-sulphur fuel oil dropped tremendously in a matter of months. In contrast, the sale of low-sulphur fuels skyrocketed in the final quarter, according to a report issued by BIMCO’s chief shipping analyst Peter Sand.
In the report he notes that preliminary estimates from The Maritime and Port Authority of Singapore indicate that 4,465,000 tonnes were sold in December 2019, a 4% increase compared to December 2018 and the highest sale of bunker fuel sold in Singapore since January 2018. Sales of low-sulphur fuels, including LSFO and MGO LS, rose by 51% month-on-month in December to 3,127,000 tonnes, compared to the 1,271,000 tonnes of HSFO sold in the same month.
“The shipping industry has been riddled with market uncertainty in recent months, but the bunker sales in the port of Singapore provide one of the first readings as to how the industry has transitioned into compliance with the IMO 2020 regulation. We have now surpassed the first wave of IMO 2020 and hopefully the accompanying market uncertainty will diminish as we proceed into 2020,” said Mr Sand.
The shift in sales was most noticeable in December 2019, when 2,630,000 tonnes of LSFO were sold, accounting for 59% of total sales compared to 1% of total sales in the last couple of years.
He also noted that HSFO still accounts for 28% of total sales, driven by bunkers purchased for scrubber-fitted ships. Many of the scrubber-fitted ships are also the largest ships consuming relatively more fuel, which will surely facilitate stable demand for HSFO.
Two weeks into IMO 2020 and the fuel price spreads between LSFO and HSFO are narrowing but it is very port dependent. He notes that at current price spreads, fuel oil costs have effectively doubled, putting heavy financial pressure on companies that must bear the cost burden themselves. The first mover advantage associated with scrubbers seems to hold true for the time being.
“Almost from one day to another, IMO2020 has resulted in a massive increase in bunkering costs for shipowners and operators, costs which for many companies cannot be sustained for a prolonged period. Shipowners are trying to pass on the additional costs of bunkering to customers, but if the underlying supply and demand fundamentals are not balanced, their efforts may prove futile,” said Mr Sand.
On 1 March 2020, the ban on the carriage of high sulphur marine fuel oil takes effect. Join the Maritime Air Pollution conference in Miami, USA, on 5 & 6 March 2020 and share vessel owner/operator experiences with their chosen compliance technologies including fuels, lubricants, engines and scrubbers.