Global energy and commodity price reporting agency Argus Media on Friday (8 January) published a summary of market mechanisms behind the increase in bunker sales at China’s Zhoushan bunkering port throughout 2020:
Bonded bunker sales at China’s largest bunkering port of Zhoushan totalled 4.73mn t in 2020, up by 620,000t or around 15pc from a year earlier, thanks to rising imports of iron ore and other bulk commodities as well as increased efficiencies, according to data from major bunker suppliers at the port.
December sales at Zhoushan in the eastern province of Zhejiang rose by 120,000t or 26pc from a month earlier to 583,000t. Demand was driven by a rise in sales of very low sulphur fuel oil (VLSFO), as bunker suppliers cleared storage space for new supplies from domestic refineries. The Chinese government awarded a 5mn t VLSFO export quota for 2021 to refiners Sinopec, CNPC, CNOOC, Sinochem and Zhejiang Petroleum and Chemical (ZPC).
China’s total iron ore imports rose by 6.5pc to 1.13bn t in 2020. Zhoushan is one of the three biggest iron ore arrival ports in China, together with Caofeidian and Jingtang. Bulk carriers and other vessels tend to bunker in either Singapore or Zhoushan, depending on prices, timing, availability and other factors.
The number of bunker spot trades reported to Argus at Zhoushan also rose. Spot volumes of VLSFO, high-sulphur fuel oil (HSFO) and marine gasoil (MGO) trades reached a combined 883,000t in 2020, equivalent to nearly 3,700t per trading day, more than 2½ times the daily average of 1,400t in 2019. Argus started using a volume-weighted average (VWA) methodology to assess the delivered-on-board bunker market in June 2019.
Zhoushan’s bunker volumes were also boosted by an increase in processing efficiency, after upgrades to its electronic platform for the outer port limit (OPL), where most international bunkering takes place.
The International Maritime Organisation (IMO) 2020 rules, which cap marine fuel sulphur content at 0.5pc, have also helped China expand its bunker volumes. The government awarded 10mn t of VLSFO export quotas for 2020, cutting bunker costs and reducing its dependence on imports. The availability of domestic VLSFO for the bunker sector also helped narrow the premium to the Singapore market — the differential between Zhoushan and Singapore VLSFO bunker spot prices — from an average of $26/t in 2019 to just $7/t in 2020.
Photo credit and source: Argus Media
Published: 11 January, 2021
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