Elshan Aliyev of the global energy and commodity price reporting agency Argus Media on Thursday (10 December) published an analysis on the market forces driving some bunker fuel suppliers to consider returning to selling HSFO despite the numerous preparations made previously to supply LSFO:
Some marine fuel suppliers in the Middle East’s major bunkering and storage centre of Fujairah, the UAE, are considering a return to selling high-sulphur fuel oil (HSFO) as bunker fuel.
The majority of Fujairah suppliers abandoned the grade last year, ahead of International Maritime Organisation (IMO) sulphur restrictions that came into effect in January. They put a ceiling of 0.5pc sulphur in marine fuels, although vessels fitted with exhaust-gas removal systems known as scrubbers can continue to burn HSFO.
Most of Fujairah’s bunker sellers converted their barges to exclusively store and deliver IMO-compliant very low-sulphur fuel oil (VLSFO). Only two suppliers at the port, Akron and Lotus, have been selling only high-sulphur marine fuel with 3.5pc sulphur content this year, and two others, Mediterranean Eastern Enterprise (MEE) and Al Arabian Bunkering (ABC) offered three grades — HSFO, VLSFO and low-sulphur marine gasoil (LSMGO). The rest focused exclusively on selling IMO-compliant fuels, rarely renting HSFO-delivering barges from others.
But rising HSFO uptake by shipping firms in recent months has prompted others to reconsider their positions.
Fujairah does not publish official statistics, but the amount of HSFO fuels involved in deals reported to Argus have risen in successive months to 40,700t in November from 33,600t in October, 29,360t in September, and 23,220t in August. Deals for 15,000t of HSFO were submitted by bunker market participants for assessment in the 1-9 December period, 35pc of the total. For comparison, HSFO made up only 18pc of submitted deals in October and 20pc in November.
Argus receives deals from suppliers, traders and buyers on a daily basis, which indicate a snapshot of general market trends.
“Two big suppliers could be returning to HSFO next year,” a senior bunker manager said. “HSFO sales have been steadily rising in the past months and November was a good month. We received enquiries for 45,000t of HSFO on spot basis but probably as much is sold on term contract basis.”
A rise in the number of scrubber-equipped vessels, particularly among dry-bulk carriers, is behind this firming HSFO demand. Shipping association Bimco said that 47pc of all newbuild dry bulk carriers delivered this year were fitted with scrubbers.
Some traders think the returning suppliers may struggle to compete on price, while others note that the medium-term regional political situation could lead to changes. If the new US administration lifts or eases sanctions on Iran this could lead to extra supply becoming available later next year. Before the reimposition of the US-led sanctions in 2018, Iran was a major supplier of marine fuels to Fujairah suppliers, accounting for 60-70pc of HSFO sold from the port.
US president-elect Joe Biden has said he will lift sanctions on Iran and rejoin the nuclear deal, otherwise known as the Joint Comprehensive Plan of Action (JCPOA), on the condition that Tehran complies with all of the required restrictions on its nuclear program.
Photo credit and source: Argus Media
Published: 11 December, 2020
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