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Analysis: Singapore LSFO, LSMGO 2018 sales may draw more bunker players as demand jumps

The sharp jump in LSFO and LSMGO sales at the Port of Singapore last year is likely to change the dynamics of Singapore’s bunker industry as it could potentially draw more marine fuel suppliers to offer these grades, industry sources said.

“The trend [rise in LSFO, LSMGO sales] has definitely generated a lot of interest,” a consultant said, adding that even some bunker suppliers from China wanted to test the Singapore market.

Total sales of 180 CST low sulfur fuel oil in Singapore rose more than fivefold year-on-year to hit 256,600 mt in 2018, data released by the Maritime and Port Authority of Singapore on January 14 showed.

Monthly low sulfur fuel oil sales averaged 33,300 mt over the fourth quarter 2018, up 45.4% from an average of 22,900 mt in Q3, MPA data showed.

Sales of LSMGO have also risen at the Port of Singapore after hitting 1.54 million mt in 2018, a near 20% year on year increase, MPA data showed.

“A reason for the increased sales of LSMGO is their preference over MGO. Moving forward, customers will likely continue to consume higher quantities of LSMGO. A lot of them are also trialing 0.5%-sulfur bunker fuel,” a bunker supplier said.

Another bunker supplier said he expected traders and suppliers to focus on such grades towards the second half of 2019, when the IMO 2020 rule inches closer.

“The timing and adoption would ultimately depend on when the oil majors will release more details around the prices and specifications,” he said.

With less than a year for the IMO 2020 rule to be implemented, many Asian shipowners have already started taking 0.5% sulfur low sulfur bunker fuel while others are following suit.

“We have had a big step up in inquiries from shipowners, especially recently,” a Singapore-based source said.

Trade sources expect demand for low sulfur bunker fuel to increase further this year as IMO’s 2020 deadline approaches.

“While demand for RMG [380 CST bunker fuel] will not die off immediately, we do get more interest and inquiries for LSMGO and LSFO these days,” a bunker trader said.

To protect the marine environment, Singapore’s recent decision to ban the discharge of wash water from open loop exhaust scrubbers in Singapore port waters from January 1, 2020 will also give 0.5% sulfur bunker fuels an impetus, sources said.

“Some shipowners who are not installing scrubbers will end up using only LSFO,” a trader said.

Meanwhile stricter rules in China have also been positive for Singapore bunkers, sources said.

China’s Ministry of Transport announced early December, the expansion of the ECAs to China’s entire coastline from January 1 compared to the initial area covering Yangtze Delta, Pearl River Delta and Bohai Rim, applied to vessels sailing within 12 nautical miles off the coast.

Large vessels are now required to burn 0.5% sulfur bunker fuels while the smaller ones have to consume 10 ppm sulfur bunkers, in line with the National Phase 5 & 6 emissions, when they are in inland waterways, according to the ministry’s announcement in early December.

The new policy also requires all ocean-going vessels to use bunker fuel with 0.1% sulfur when they are entering inland waterways areas in China, starting January 1, 2020.

“More and more of our shipowners from China are looking to source for LSFO on a delivered Singapore basis,” a bunker purchaser said.

“The market is also looking at 0.5% bunker term contract negotiations going into Q2 and Q3 2019, even though there isn’t a definitive price yet,” he added.

“Volumes [of LSMGO] used to be around 25,000 mt/month. Since November it’s been close to 40,000 mt/month,” a China-based supplier said.

In China, LSFO for bonded bunkering is not produced by local refineries, but is imported from Singapore, Malaysia and the Middle East, and stored at tanks in China’s major ports, such as Shanghai and Zhoushan.
Source: Platts

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