FIS Fuel Oil Derivatives broker Chris Hudson on Friday (10 January) published an analysis a look at the early 2020 action and identified China as an unlikely source of relief for the shipping market; the analysis has been shared with Manifold Times:
VLSFO derivatives basis ex-wharf have been slowly growing in liquidity with Feb pricing at around a $260 premium to HSFO prices in Rotterdam and Singapore. Compared to gasoil, the Feb VLSFO is currently a $65 discount for Rotterdam and a $9 discount in Singapore.
This is not such pleasant reading if you work in the physical fuel department and are having to contend with all the problems of implementing IMO 2020.
The physical market is dealing with huge premiums for the new low sulphur product, which is sitting just under, and in some cases even above, gasoil prices that were meant to have acted as a cap on prices.
As a cap then, it’s been pretty useless, unless you use it to hide the egg on your face if you had predicted the effectiveness of the gasoil cap.
What is seemingly driving this huge premium for the new product is one major factor: that there simply aren’t enough barges to cater for the bunkering demand required. This is the bottleneck that has pushed up prices and means that physical providers can charge what they want for a product that is so desperately needed.
But have no fear, here comes the Chinese cavalry! Beijing is believed to have approved a long-awaited tax rebate on fuel oil, paving the way for domestic refiners to supply bunker fuel to ships plying the international community.
Chinese refiners have capacity to produce 18.5 million mt/year of VLSFO but have not been able to compete in the international market due to government tax.
This rebate will not only bring more product into the market but will hopefully then start to bring down prices generally, especially in Asian shipping hubs.
So there we have it, prices are high, exacerbated by a lack of barge capacity, but there could be a bit of saving grace from the Chinese producers.
Published: 13 January, 2020
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Claiming USD 108,887.87 for the supply and delivery of 310.00 mt of low sulphur marine gas oil at the Port of Jeddah on or about 23 February 2020.
A sanitisation expert offers Manifold Times a summary of the processes involved in disinfecting a ship together with the equipment and products used in the operation.
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Laboratory looking to collaborate with Singapore bunker surveyors to roll out COVID 19 testing service, which has been successfully adopted by land-based industries, to the maritime sector.
Sinfeng Marine Services filed an application to the Court of Appeal to withhold information from the liquidators on October 2019; the appeal was dismissed a month later.