Global energy and commodity price reporting agency Argus Media on Tuesday (28 April) published an update on China’s first low-sulphur fuel oil (LSFO) bunker export quotas from the Ministry of Commerce and its implications:
China’s commerce ministry has issued the first batch of low-sulphur fuel oil (LSFO) bunker export quotas for 2020, comprising 10 mn t (65.5mn bl) to five domestic refiners. Another 5mn t for 2020 will be issued later this year.
Sinopec was allocated 4.29mn t, CN% 2.95mn t, CNOOC 860,000t, Sinochem 900,000t and 1mn t to Zhejiang Petroleum and Chemical that owns the 240,000 b/d Rongsheng refinery in east China’s Zhejiang province free trade zone centred on Zhoushan port.
Chinese refiners had started to export fuel oil while waiting for the quota allocations. The rising exports have resulted in key Chinese ports’ LSFO bunker prices to move to a discount versus Singapore values since mid-April, with prices of 0.5% sulphur bunker in Zhoushan assessed at a $6.70/t discount yesterday.
China’s main refineries said they have more than 18mn t/yr of LSFO production capacity, which covers the export quota expected for this year. But LSFO production may not be economical all the time, so it is possible these refiners will buy from other Chinese refineries to fulfil the export quota.
It also means China will need to import high-sulphur fuel oil (HSFO) for its bonded bunker market. Key suppliers like Sinopec and Chimbusco will ensure major Chinese ports have prompt supplies of HSFO. Bunker orders for other ports will need to be placed a few days earlier in preparation for delivery.
China’s bonded bunker sales, including LSFO, HSFO and marine gasoil, totalled 13.18mn t in 2019, which are expected to rise to about 17mn t in 2020. Sales at Zhoushan rose to 993,000t during January-March, up by 14% from the same period a year earlier.
Photo credit and source: Argus Media
Published: 29 April, 2020
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