24-10-2017

Singapore bunkers to witness positive growth despite challenges

With less than three months for 2017 to end, Singapore is set to achieve another year of positive marine fuel sales — thanks to robust demand, particularly from box shippers, and the transparency that the mass flow meter mandate has brought, industry sources told S&P Global Platts recently.

From January through September, Singapore’s marine fuel sales were about 38 million mt, a rise of around 4% year on year, Maritime and Port Authority of Singapore data showed.

“Looking at the MPA figures, Singapore looks likely to hit 50 million mt this year,” Simon Neo, regional manager Asia, International Bunker Industry Association, said.

The year-on-year growth rate, however, is expected to slow down for the city-state as the world economy faces headwinds, along with tighter rules for the shipping industry. Some sources forecast the growth rate to be about 2.8%-3% in 2017, compared to over 7% in 2016, when the bunker fuel sales touched 48.6 million mt, surpassing the 2015 record high of 45.2 million mt.

Still, even with the slower expected growth rate, Singapore’s achievement is nothing short of remarkable as the world’s largest bunkering port managed to fend off competition from other regional ports, pulling in an average of about 4.22 million mt a month, industry sources said.

“Container liners, China COSCO Shipping, CMA-CGM, Maersk, are taking bunkers here. Bulk carriers, I don’t see a lot, but Oldendorff, they take a lot of bunkers in Singapore,” Neo said.

Due to attractive concessions on the port dues, some transshipment volumes have switched from Malaysia’s Port Klang and elsewhere to Singapore, sources said. Advances in technology and continued investment in the infrastructure also continue to favor Singapore as a hot spot for bunker calls, they said.

GET WHAT YOU PAY FOR

On January 1, 2017, Singapore became the first and only country worldwide to kick off the mass flow meter mandate for fuel oil deliveries.

MFMs measure the flow rate in the pipe, gauging the quantity as well as the mass and density of the fuel. With the MFM mandate in place for more than nine months, initial industry pessimism has diminished and participants have realized its efficiency and have become more receptive toward its implementation despite higher associated costs, sources said.

Sources noted that the cost of supp ling bunker fuel via MFMs was about $4-$10/mt higher than the normal cost. However, the benefits under the mandate offset the additional costs as potential buyers can now be absolutely sure that they are getting the exact volume for which they are paying, they said.

And thanks to the MFM, errant players are also being weeded out of the industry, instilling more confidence in the technology. “We expect the number of players to shrink further as the MPA continues its vigil,” a trader said.

MFMs have also contributed to increased bunker fuel sales by encouraging suppliers to sell bigger stem sizes — parcels ranging from 1,000 mt to 5,000 mt instead of 500 mt or smaller — to achieve economies of scale, while customers are also seeking bulk purchases as it allows them to negotiate better prices, sources said.

“There’s a lot of term volume which you don’t see in the spot market,” another trader said.

The sale of bigger-sized stem is also due to the bunker barge Qmin, the lowest flow rate at which the metering system has been qualified to operate. For instance, if the supplier’s bunker tanker’s Qmin is 100 mt/ hour but the receiving vessel’s rate is 80 mt/ hour, the meter will likely give an inaccurate reading.

“If the flow rate drops to below the [bunker] barge’s Qmin, it can go either way, the quantity of bunkers delivered could be more, in which case the supplier loses out; if less, the supplier also gets a headache in resolving the issue, which is not worth his while,” another trader said.

QATAR’S RIPPLE EFFECT

In early June, Saudi Arabia, the UAE, Bahrain and Egypt broke diplomatic ties with Qatar over Doha’s alleged support to terrorist groups. The UAE’s Fujairah port, the world’s second largest bunkering port, had also imposed restrictions on tankers heading to or arriving from Qatar.

While these restrictions were later relaxed a bit, with ships coming from and going to Qatar being allowed to bunker in the Fujairah Offshore Anchorage Area as long as they were not Qatari-flagged and/or Qatari-owned, at least three bunker suppliers in Fujairah were still heard to be scaling down their operations in the UAE port following the Qatar crises, sources said.

“We are trying to make up for lost volumes in Fujairah by beefing up [volumes] in Singapore,” a bunker industry participant, who operates in both the markets, said.

The industry estimates Fujairah’s marine fuel sales to be around 12 million-15 million mt in 2016. Traders in Fujairah said that about 60% of the monthly 150,000 mt bunker fuel demand from Qatargas and RasGas has shifted to Singapore.

Source: Platts

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