Rotterdam Hi-5 bunker spread hits all-time low
The premium of very low sulfur fuel oil over its high sulfur equivalent at Rotterdam port fell to a record low on Aug. 21, as the latter stays resilient to bearish fundamentals in the global oil complex.
In Rotterdam, the premium of 0.5% sulfur bunker fuel over 3.5% fuel oil, also known as the Hi-5 bunker spread, was assessed at $27/mt on Aug. 21, S&P Global Platts data showed. The premium has descended to less than a tenth of the highs seen in January, reaching its lowest levels since Platts began assessing it in July 2019.
0.5%S marine fuel has been seeing dampened demand in the Amsterdam-Rotterdam-Antwerp region as concerns over the coronavirus still linger, alongside a seasonal summer lull. Sources said there is ample supply of product, as stocks for all fuel oil products in the region jumped 10% on the week to Aug. 19.
In comparison, high sulfur fuel oil has been contending with limited supply, yet strong demand from the US and West Africa; local demand has also remained supportive. Sources said limited product was going into the ARA region as it heads trans-Atlantic for use as coker feed.
In a year of the lower sulfur cap rule for shipowners and unexpected volatility from the global pandemic, bunker buyers are keeping an eye on premiums as some deliberate over how to power their vessels.
Options include either burning low-sulfur fuels or retrofitting scrubbers on board their vessels so that they can burn the cheaper 3.5% HSFO bunker fuel.
With estimates of about $2 million per ship, the pace of scrubber fittings has decelerated due to coronavirus-related slowdowns at shipyards, a reluctance to set aside capital during a global financial downturn, as well as a narrower Hi-5 bunker spread, according to market sources.
Market estimates had previously extended the payback time for a scrubber from 1-2 years to 4-5 years.
However, Danish product tanker group Torm said recently it would remain active in the installation of scrubbers, expecting to install a total of 49 scrubbers. As of Aug. 17, it had installed 40 scrubbers.
“In order to cut the sulfur oxide emission, shipowners who can afford to buy a scrubber have done so to a substantial extent, with investments predominantly directed toward high consumption ship types,” Peter Sand, BIMCO’s chief shipping analyst, said on Aug. 13.