Singapore could be losing some market share in the bunkering sector to regional players in 2020 due to the surplus availability of compliant bunker fuels in surrounding regions such as China, says the Senior Research Analyst of global commodities consultancy Wood Mackenzie.
“Singapore, for example, could potentially lose some of its market share for bunker fuels to China as shippers look for alternative locations with a surplus of compliant fuels,” Iain Mowat said reportedly.
“China, with ample MGO supply, is well positioned to attract shippers.”
His comments accompany a report which suggests bunker fuel costs of the global shipping sector to increase by $24 billion in 2020 when the 0.5% sulphur cap for marine fuel takes effect.
A ‘base case’ used by Wood Mackenzie, which uses the current total global shipping fuel bill of roughly $100 billion, indicates costs to increase by $24 billion in 2020.
The rise will be caused by an expected switch from traditional high sulphur bunkers to lower sulphur but more expensive marine fuels such as marine gasoil (MGO), ultra low sulphur fuel oil, and similar low sulphur varieties.
“Switching to MGO is a more costly solution, and in full compliance, would probably see freight rates increase, perhaps by around $1 a barrel,” said Mowat.
Wood Mackenzie, meanwhile, believes just 2% of the global fleet will be fitted with scrubbers by 2020 due to limited financing options, scrubber manufacturing capacity, and dry-dock space.
Hence, the refinery sector will need to increase production of 2020 compliant 0.5% sulphur fuels for the shipping sector, which could cause a shift in primary locations for bunkering operations due to fuel availability, by the deadline.
Published: 12 April, 2018
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