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Shanghai Futures Exchange celebrates Fuel Oil futures milestones since 2004

Fuel oil futures was one of the first futures products approved following the overhaul of China’s futures market and only domestic energy futures product at the time.

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The following article published by Manifold Times on 28 June was sourced from China’s domestic market through a local correspondent. An online translation service was used in the production of the current editorial piece:

Shanghai Futures Exchange (SHFE) and its subsidiary Shanghai International Energy Exchange (INE) recently shared highlights of Shanghai's fuel oil futures market since its launch in 2004. 

A list of major milestones were shared in their Fuel Oil/ Low Sulphur Fuel Oil Futures Market Development Report 2022. 

This development builds upon a joint announcement on 21 June by SHFE’s and Zheijiang International Oil and Gas Trading Center regarding the official launch of a buyer’s quotation system for low sulphur bonded bunker fuel from Zhoushan port. 

The new system is part of the “Building a Quotation Mechanism for Zhoushan Bonded LSFO Bunker Price” that was selected as among the 2021 Best Institutional Innovations of the China (Zhejiang) Pilot Free-Trade Zone.

Shanghai’s first dip in the fuel oil futures market history started on 25 August 2004 when Fuel Oil futures (FU) was listed on the Shanghai Futures Exchange for trading. 

Back then, the fuel oil futures was one of the first futures products approved following the overhaul of China’s futures market and the only domestic energy futures product at the time. It was also SHFE’s first step in building up China’s crude oil futures market.

The following are main highlights of Shanghai Futures Exchange’s milestones:

2004-2017

2004.08.25  Fuel oil futures (FU) was listed on the Shanghai Futures Exchange for trading
The listing marks a major progress under the Opinions of the State Council on Promoting the Reform, Opening-up, and Steady Development of the Capital Market.

2008.12.23  Trading volume of fuel oil futures reached the historic record of 905,512 lots (Single-counted basis)

2009  Trading volume of fuel oil futures ranked fifth among all energy derivatives in the world by FIA.

2011.01.14  Fuel Oil contract was revised.
Deliverable grade was adjusted from industrial 180 CST fuel oil to domestic 180 CST bunker fuel. Contract size was updated from 10 mt/lot to 50 mt/lot.

2012  Fuel oil futures market remained sluggish due to change in consumption structure and other factors

2017.06.01  Implementation of the Interim Measures of the China (Zhejiang) Pilot Free Trade Zone for the Administration of Bonded Oil Sales to International-Route Vessels

 

2018

2018.06.26  Fuel oil futures contract was revised for the second time
Deliverable grade was changed from domestic 180 CST bunker fuel to bonded 380 CST bunker fuel. Existing contracts stopped trading since June 27, 2018.

2018.07.16  Fuel oil futures contract was re-listed on the Shanghai Futures Exchange, the first pricing mechanism for China’s bonded bunker fuel market

2018.10.11  Interim Provisions on Supplementary Inspection Items of Fuel Oil (Futures) was issued
Eight new alcohols, ethers, and phenols, including styrene and phenol, were added to the list of compounds to be inspected, resulting in more effective management of the deliverable grade and better protection of the interest of futures investors.

2018.11.14  The first warrants for bonded 380 CST fuel oil futures were created
PetroChina International Co., Ltd. registered the first warrants for the high-sulphur fuel oil futures after loading 2,000 mt of the deliverable grade into the depot of Sinochem Xingzhong Oil Staging (Zhoushan) Co., Ltd. (Sinochem Xingzhong).

 

2019

2019.06.05  The list of market makers for fuel oil futures was released

2019.06  Low sulfur fuel oil (LSFO) blending with component oils of different HS Codes started for the first time in China

China Marine Bunker (PetroChina) Co., Ltd. (Chimbusco) completed China’s first LSFO blending from the low sulphur components and sulphur-containing deep-processing components, of different HS Codes, produced by domestic refineries. This signals the inception of a new, “production + import + blending” supply model in China for LSFO

2019.07.24  Direct bunkering service backed by the warrants for bonded 380 CST fuel oil futures debuted in China
500 mt of bonded 380 CST fuel oil previously stored in the futures delivery depots operated by Sinochem Xingzhong were loaded out and fuelled into three cargo ships including the Spanish vessel CELANOVA by the Zhoushan-based bunker barge Guo Hong 6. This type of bonded bunkering operation, completed for international-route vessels directly following the cancellation of the futures warrants and the load-out of the deliverables, offers convenience to enterprises engaged in spot trading.

2019.07  Multiple domestic refineries have successfully produced low sulphur fuel oil to be supplied to the bunker fuel market

2019.10  The Ministry of Transport issued the Implementation Plan for the IMO 2020 Sulphur Limit

2019  In 2019, the SHFE fuel oil futures contracts recorded 177 million lots in trading volume, 350.02% higher than the year before. Turnover hit RMB 4.27 trillion, up by 254.49%; year-end open interest was 462,049 lots, up by 121.65%. (Single-counted basis)

2019 Trading volume of fuel oil futures ranked fourth among all energy derivatives in the world by Futures Industry Association (FIA).

 

2020

2020.01.22  China instituted tax refund/exemption for export of bonded fuel oil
The Ministry of Finance, the State Taxation Administration, and the General Administration of Customs jointly issued the announcement on the Implementation of Export Tax Refund Policy for Fuel Oil Supplied to International Voyage Vessels. Effective from February 1, 2020, the tax refund/exemption policy would apply to fuel oil (HS Code 27101922) supplied at Chinese coastal ports to international-route ships at the VAT refund rate of 13%.

2020.04.27  Fuel oil futures positions reached an all-time high of 119,800 lots (single-counted)

2020.04.28  Trading volume of fuel oil futures reached a historic high of 5,919,090 lots (single-counted)

2020.05.01 The Ministry of Commerce issued the export quota for low sulphur bunker fuel for 2020

The Ministry of Commerce and the General Administration of Customs added LSFO No. 5 to No. 7 (sulphur content not higher than 0.5% m/m, HS Code: 2710192210) to the Catalogue of Goods Subject to Export License Administration (2020). The Ministry of Commerce also announced the first allotment of export quota of low-sulphur bunker fuel for 2020. A total of 10,000,000 mt of export quota was allotted to 5 oil companies: CNPC 2,950,000 mt, Sinopec 4,290,000 mt, CNOOC 860,000 mt, Sinochem 900,000 mt, and Zhejiang Petrochemical 1,000,000 mt.

2020.06.22  LSFO futures (LU) was listed for trading on the Shanghai International Energy Exchange (INE)
LSFO futures was traded on the basis of “international platform, net pricing, bonded delivery, and RMB denomination.” Call auction on the day of listing saw 1,070 lots being traded by 106 members representing 650 clients. On the first day, the dominant contract LU2101 registered a trading volume of 130,439 lots and an open interest of 24,859 lots. PetroChina International Co., Ltd., Sinopec Zhejiang Zhoushan Petroleum Co., Ltd., PetroChina Fuel Oil Co., Ltd., Sinochem Oil Co., Ltd., and PetroChina International (East China) Co., Ltd. all took part in first-day trading. (Single-counted basis)

2020.07.01  The list of market makers for LSFO futures was released

2020.08.01  “INE’s listing of LSFO futures” was named among the tenth wave of financial innovations of China (Shanghai) Pilot Free-Trade Zone

2020.08.10 China’s first warrant-based re-export of bonded 380 CST fuel oil futures was completed
Under the supervision of Zhoushan Customs, the ship MAERSK TACOMA anchored at Berth No. 2 of Aoshan Oil Hub of Sinochem Xingzhong completed the load-out of around 16,000 mt of bonded 380 CST fuel oil for transport and re-export to Singapore. This represented China’s first futures warrant-based re-export of commodities.

2020.10.04  China’s first bunkering service to international-route ships Zhejiang and Shanghai cross-port areas was completed at the Port of Yangshan
At the Shangdong Wharf of the Shanghai International Port (Group) Co., Ltd. in the Yangshan Port Area, SANTA VANESSA, a large container ship operated by MSC, was supplied 1,000 mt of bonded low-sulfur bunker fuel by Zhejiang Seaport International Trading Co., Ltd., a company based in the Zhejiang Free-Trade Zone. This marked China’s maiden trial of cross-port bunkering of international-route ships.

2020.11.02  The first LSFO futures warrants were created
PetroChina International (Zhejiang) Co., Ltd. registered and created the first warrants for the LSFO futures after delivering 4,090 mt of the fuel (produced by CNOOC Zhoushan Refinery and entitled to tax refund at export) into the depots operated by Sinochem Xingzhong

2020.11.23  First direct bunkering service backed by the warrants for LSFO futures was completed in China
With the support of Zhejiang Customs and Zhoushan Customs, the bunker barge Zhe Hai You 5 supplied 1,600 mt of LSFO (obtained through delivery against the LSFO futures) to the Liberian vessel SEACON BRAZIL, completing China’s first direct bunkering operation backed by LSFO futures warrants. This operation represented an innovation in delivery supervision, namely, guaranteed quantity, traceable process, and controllable risk throughout the load-in, warrant creation, and bonded supply of domestically produced, tax refundable for-export fuel oil.

2020.12.14  Rules for group delivery and overseas take-delivery of LSFO futures were introduced
The Delivery Rules of the Shanghai International Energy Exchange (Revised), the Group Delivery Management Rules of the Shanghai International Energy Exchange, and the INE Guidelines on Take-Delivery of Low Sulfur Fuel Oil Futures Overseas were released. These rules have made factory delivery and the all-new model of “domestic delivery + overseas take-delivery” available to LSFO futures. These changes would help build experience for the quality opening-up of China’s futures market and support China’s new development paradigm under the “Dual Circulation” strategy.

2020.12.14  The first group delivery center, factory warehouse, and overseas commodity storage facilities for the group delivery of LSFO futures were established
PetroChina International Co., Ltd. set up the first factory warehouses for LSFO futures as a group trader. The overseas delivery locations are in Singapore and Fujairah.

2020.12.25-31  First cross-border take-delivery of LSFO futures was completed
46,590 mt of LSFO, valued at RMB 116,102,280, was delivered against the LU2101 contract. Three companies in Singapore—Trafigura, Freepoint, and China-Base Resource—took part in this first cross-border take-delivery transaction.

2020  China recorded the net export of fuel oil in the last decade
China exported 15,490,000 mt of fuel oil in 2020, up by 44.24% from the year before.

2020  SHFE’s fuel oil posted the second-largest trading volume among all energy derivatives in the world (by FIA) and the highest in the domestic futures market

 

2021

2021.01.22  First pledge of bonded fuel oil futures warrant was completed 

The Shanghai Customs processed the first application for pledge of the bonded futures warrants, to support innovation by the Yangshan Bonded Port Area in the bonded delivery of futures. This type of transaction promises to imbue financial functions to bonded delivery in addition to its current logistical functions, thus helping Shanghai build a large-scale commodity market.

2021.03  INE’s LSFO futures served as the price benchmark for overseas fuel oil trade for the first time 

Freepoint Commodities Singapore entered into bunker supply contracts with Chimbusco International Petroleum (Singapore), China Merchants Energy Trading (Singapore), and COFCO International Freight, with the contract price linked to the price of INE’s LSFO futures contract. This demonstrates the rising pricing influence of the LU contract in the Asia-Pacific and global bunker fuel markets.

2021.06  The Trial Measures of Shenzhen for the Administration of Sales of Bonded Fuel Oil to International-Route Vessels took effect

2021.06.21  The ceremony celebrating the first anniversary of LSFO futures and the publication of Zhoushan LSFO bonded bunker price was held in Shanghai
SHFE and Zhejiang Mercantile Exchange (ZME) jointly launched the Zhoushan LSFO bonded bunker price,which is anchored to the settlement price of INE’s LSFO futures. The price represented a major innovation in the collaboration between the spot and futures markets. It provides a new, proven, and reliable pathway for transmitting the LSFO futures price to the spot suppliers and helps raise the prominence of Zhoushan’s spot market for bonded fuel oil.

2021.06.21 Delivery storage facilities for LSFO futures covered major coastal ports in China including Shanghai, Zhoushan, and Qingdao
Shandong Port Group Co., Ltd. was approved as a designated delivery storage facility for LSFO futures.

2021.07  Shanghai ranked first in 2021 among international shipping hubs
For the first time in its history, the Ningbo Zhoushan Port ranked among the top ten international ports, according to the 2021 Xinghua-Baltic International Shipping Centre Development Index Report. Domestically it ranked second, behind only Shanghai.

2021.09.16  The LSFO futures contract was revised
The optimised deliverable grade and validity duration of warrants for the LSFO futures came into effect on March 1, 2022.

2021.10.13  ““Building a Quotation Mechanism for Zhoushan Bonded LSFO Bunker Price” was among the second wave of best institutional innovations of the China (Zhejiang) Pilot Free-Trade Zone in 2021

2021.10.21  The number of companies submitting offer quotes for the Zhoushan LSFO bonded bunker price has increased to five
Sinopec Zhejiang Zhoushan Petroleum Co., Ltd., China Marine Bunker (PetroChina) Co., Ltd. (Chimbusco), Zhejiang Free Trade Zone PetroChina Fuel Oil Co., Ltd., Zhejiang Seaport International Trading Co., Ltd., and Zhejiang Petroleum Fuel Oil Sales Co., Ltd. issued offer quotes for the bunker fuel. The quotes are in Renminbi and calculated based on the current-day settlement price of M (first line) + 2 LSFO futures contracts plus premium/discount, to directly reflect the LSFO price in the Northeast Asian market.

2021.10.29  The mean of settlement price for LSFO futures was released
SHFE and INE began to release the mean of settlement price of LSFO futures on their websites, to provide price benchmarks for the market.

2021.11  Zhoushan Port became the sixth-largest bunkering hub in the world
The Zhoushan Port jumped to the sixth place on the 2020 list of the World Top 10 Bunkering Hubs released by the Marine Fuel Industry Committee of the China Petroleum Circulation Association.

2021.11.13  “The cross-border delivery of LSFO futures” won the Third Prize of the 2020 Shanghai Financial Innovation Award

2021.12.09  Trading interconnectivity was established between the SHFE Standard Warrants Trading Platform and Zhejiang Mercantile Exchange (ZME)’s quotation system

2021.12.15  Bonded warrant transfer and quotation module was launched on the SHFE Standard Warrants Trading Platform
The quotation function was available for INE-listed products including medium sour crude oil futures (SC), TSR 20 futures (NR), LSFO futures (LU), and bonded copper futures (BC).

2021.12.16  The Interim Measures of Hainan Free-Trade Port for the Administration of Sales of Bonded Marine Fuel was released

2021.12  The LSFO export quota for 2021 totaled 11,390,000 mt, of which Sinopec accounted for 61.11%, CNPC 29.68%, and CNOOC 8.34%

2019-2021  China’s supply of bonded bunker fuel grew steadily
China’s supply of bonded bunker fuel hit 16,870,000 mt in 2020, up 57.37% from the 10,720,000 mt in 2019. Supply rose again in 2021, by 22.47% to 20,660,000 mt.

2020-2021  According to FIA, the trading volume of China’s fuel oil futures ranked second among all energy derivatives in the world for two consecutive years. 

 

2022

2022.01.25  The Measures of Shanghai Municipality for the Administration of Supplying Bonded Fuel to International-Route Ships was released

2022.02.11  The Interim Measures of Guangzhou Municipality for the Administration of Supplying Bonded Fuel to International-Route Ships was released

2022.01.28  A second company established the group delivery center, delivery factory, and overseas commodities storage facility for the group delivery of LSFO futures
Sinopec Fuel Oil Sales Co., Ltd. became the second company to set up factory warehouse for LSFO futures as a group trader, with the delivery location in Singapore. This means both CNPC and Sinopec are operating factory warehouses for the group delivery of LSFO futures, paving the way toward more overseas delivery facilities in the future.

2022.05  The Ministry of Commerce announced the second rounds of LSFO export quotas for 2022
The first and second rounds of export quotas were 6,500,000 mt and 3,250,000 mt respectively, rising by 21.9% from the year before. Domestic products are accounting for a progressively larger share of China’s bonded fuel supply market. In the first quarter of 2022, domestic LSFO output represented 68% of the country’s total supply of bonded fuel, being more competitive in the global market.

2022.05 17 companies obtained license to supply bonded fuel oil to international-route ships in Zhoushan
Zhoushan is now home to 17 bonded fuel suppliers; 5 hold the national license and 12 hold the Zhoushan local license.

2022.06.09  Trading volume in LSFO futures hit a historic record of 258,487 lots (single-counted)

2022.06.21  The ceremony celebrating the second anniversary of LSFO futures and the publication of bid information on the Zhoushan LSFO bonded bunker price was held in Shanghai
The Zhoushan LSFO bonded bunker price now supported bids from buyers. Associated Maritime Co. (Hong Kong) Ltd., Dalian Chun An Ship Management Co., Ltd., Trans Power Co., Ltd., HG Shipping Group Co., Ltd., ETL Shipping (Pte.) Ltd., and Zhejiang Yonghang Shipping Co., Ltd. were the first group of companies to submit the bid prices.

Related: China officially launches Zhoushan Bonded Fuel Oil Index System with ‘Buyer’s Quotation’
Related: China: Zhoushan port digitalises bunker fuel, oil product storage availability info
Related: China: Zhejiang Oil Center launches price information service for the storage of oil products
Related: Zhoushan and Ningbo authorities update bonded bunkering procedure document for shipowners
Related: Zhoushan port launches bunkering operations at Qushan temporary anchorage

 

Photo credit: Shanghai Futures Exchange
Published: 28 June, 2022

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Poland: ORLEN to strengthen position in bunker fuels sector with new oil terminal

With the terminal’s commissioning, the company plans to introduce a bunkering vessel to service the Tri-City ports with conventional marine fuels and biofuels.

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ORLEN oil terminals

Polish multinational oil refiner ORLEN Group on Wednesday (12 June) said it is solidifying its presence in the marine fuels market with the construction of a new oil terminal that is scheduled for completion by the second half of 2025.

Construction of the Martwa Wisła terminal, located on the Martwa Wisła river, has already exceeded 70%.

The Martwa Wisła terminal will enhance the logistics capabilities of the Gdańsk refinery, allowing for the transshipment of approximately 2 million tonnes of fuel products annually.

The first four loading arms have already arrived at the construction site and the remaining four loading arms are slated for delivery by the end of June. The devices, with a throughput capacity of up to 500m³/h, will be used at transshipment points to load tankers.

With the terminal's commissioning, the company plans to introduce a bunkering vessel to service the Tri-City ports (Gdańsk, Gdynia, Sopot) with conventional fuels and biofuels.

For over 20 years, the Group has been supplying quality marine fuels to all Polish seaports. Its refinery product portfolio encompasses a wide range of fuels that guarantee quality and strict compliance with regulations, including MGO (DMA 0.1%S), ULSFO (RMD80 0.1% S) and LNG, which will in the near future be complemented with ‘green’ alternatives.

All marine fuels offered by ORLEN comply with the international ISO 8217:2017 standard and meet the requirements of the MARPOL Convention.

 

Photo credit: ORLEN Group
Published: 14 June 2024

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Australia: Crew of bunker tanker “Champion 63” to strike following employer’s refusal to negotiate

‘BP has decided they can’t pay industry standards in Brisbane and want to keep their workers’ wages low,’ states MUA spokesman.

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Champion 63

The crew of Champion 63, a 2022-built Australia-registered bunker tanker with home port of Brisbane, is set to go on strike after bargaining for a new enterprise agreement has stalled, stated the Maritime Union of Australia (MUA) on Wednesday (12 June).

Members of the Australian Maritime Officers Union, the Australian Institute of Marine and Power Engineers, and MUA voted up protected industrial action on 11 June 2024.

The crews have been trying to formalise their employment conditions with ASP Ship Management since the bunkering operations commenced in February 2023. It took ASP approximately six months to issue the Notice of Employee Representational Rights (NERR) and start bargaining.

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“The crew of the new bunker barge on the Brisbane River and the maritime unions bent over backwards to make this vessel work,” said MUA Assistant Branch Secretary Paul Gallagher.

“Including low wages, excessive hours and a roster that does not allow crew to take leave. 18 months down the track when it comes time for BP to reward their crew and pay industry standards what do they do? They deny them fair wages, a workable roster and threaten their back pay!”

The AMOU filed a bargaining dispute after ASP refused to take their claim for a roster that does not demand that crews work every weekend seriously.

“Having to work every weekend because ASP does not have suitable relief arrangements is unacceptable,” said AMOU Industrial Officer Tracey Ellis.

“Crews have a right to be rostered time off to spend with their family. Waiting for ASP to fix the issue did not work, filing a Bargaining Dispute in the Fair Work Commission did not work, so the crews will take protected industrial action until their concerns are taken seriously.”

The crews onboard the Champion 63 voted up an unlimited number of stoppages of work of between one hour and 48 hours.

Gallagher added that, “the Maritime unions will not tolerate the big multinational fuel barons of this world undermining the Australian maritime wages and conditions of seven local mariners who are trying their best to support our own local shipping and Cruise Ship industry. If your cruise holiday gets delayed it is because, after recording over $40 billion profit in last two years, BP has decided they can’t pay industry standards in Brisbane and want to keep their workers’ wages low.”

 

Photo credit: Maritime Union of Australia
Published: 13 June 2024

 

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Infineum releases Sustainability Report 2023 outlining its sustainability progress

Infineum celebrates 25 years of operations and looks forward to the next 25 years of progress towards its net zero ambition by 2050, says CEO.

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Press release Infineum remains focused on our purpose to become a sustainable world class specialty chemicals company

Infineum, a specialty chemicals company headquartered in the UK, on Thursday (13 June) released its fourth annual Sustainability Report, reinforcing its purpose to create a sustainable future through innovative chemistry.

Aligned with the company’s strategic plan to achieve its vision and purpose, Infineum announces:

Publication of its Sustainability Report 2023 (Sustainability.Infineum.com), which outlines the efforts and progress that the company has achieved through the year, including:

  • Championing of Diversity, Equity & Inclusion (DE&I) throughout the organisation
  • Achievement of 28% of colleagues volunteering, surpassing its 2025 target of 25%
  • Increased share of relevant supplier spends covered by sustainability assessments to 62%

Launch of revamped corporate website (www.Infineum.com) to better represent Infineum as a specialty chemicals company, showcasing Infineum’s existing capabilities, as well as diversification in the new markets

The joint venture, formed in 1999 between Shell and Exxon Mobil, celebrates its 25th anniversary this year and recently shared its restructure strategy to two business units, Sustainable Transportation and Energy Applications.

“As Infineum celebrates 25 years of operations and we look forward to the next 25 years of progress towards our net zero ambition by 2050, I am pleased to share our fourth annual sustainability report,” says Infineum CEO Aldo Govi.

“This is a journey and we have made excellent progress, but improvement will not always be linear, especially when set against the backdrop of a challenging external environment, but our purpose of creating a sustainable future through innovative chemistry, continues to drive us forward.

“We remain focused on our vision to become a sustainable world-class specialty chemicals company. Sustainability was at the core of reshaping Infineum to better enable us to contribute to sustainable mobility and the transition to a low-carbon economy.”

 

Photo credit: Infineum
Published: 13 June 2024

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