S&B ANALYSIS: A quarter of global tonnage now uses HSFO with record discount on VLSFO

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Less than three years after the IMO 2020 transition, a quarter of the world’s fleet is once again using HSFO as its main fuel – and is benefiting from record discounts on the bunker bill.

About 24.5% of the world fleet in tonnage, or 4,730 ships in absolute numbers, now have scrubbers equipped, according to a Clarkson Research note released Wednesday. 26 new constructions with equipped purifiers were ordered in 2022Next 268 orders Last year.

Ignoring other factors, this increase in the scrubber-equipped fleet is expected to cause the gap between VLSFO and HSFO to narrow, the measure of how much these vessels can save on their fuel bills, as demand increases for this last.

But the average VLSFO-HSFO spread in the main bunkering ports amounted to $420.50/ton Tuesday, according to Ship and holdit is G20 index, a record. The gap narrowed again to $380.50/ton by Thursday as world crude prices fell.

refineries Europe and the WE operate at a significantly increased capacity to replace Russian middle distillates that the West is no longer willing to import. The ripple effect of this is much higher residual fuel oil production, and this product has few outlets and therefore much of it ends up in the HSFO bunker pool.

Russian heating oil is also no longer sent to the United States Gulf to be used as refinery feedstock, and much of this unwanted oil would reappear in the bunker market.

This has led to consistently underperforming HSFO prices relative to VLSFO over the past several months, with Ship & Bunker’s G20 VLSFO-HSFO spread widening by $221.50/ton between the start of May and the start of July.

“HSFO will likely continue to be cheap while we face Russian, Iranian and Venezuelan sanctions,” Adrian Tolsoncouncil manager BLUE previewtold Ship & Bunker on Friday.

“These fuels will find their way into the bunker market because they are unable – especially in the case of Russia – to find their traditional commodity markets.”

The share of HSFO is increasing

The growth in HSFO demand from ships fitted with scrubbers is also making its presence felt in official bunker volume statistics.

Out of Singapore, rotterdam, Fujairah and PanamaPanama saw the strongest growth in HSFO’s share of bunker sales in the first quarter.

HSFO took over 27.7% of Singapore sales in the first three months of the year, compared to 24.3% one year earlier. In Rotterdam, the share fell slightly to 27.6% in Q1 2022 of 27.9% one year earlier. Fujairah’s share in Q1 2022 was 19.2%from 17.1% a year earlier, and Panama’s share in Q1 2022 was 25%from 17.5% one year earlier.

Singapore’s share peaked at 28.9% in March – the highest since 2019 – but declined in April following its HSFO contamination issues in February and March. HSFO’s share was there 25.2% in April and 26% in May.

Payback in six months

With nothing less than a global crash in crude prices likely to significantly narrow the VLSFO-HSFO gap, the future looks bright for scrubber facilities.

“If you’re a large container ship using about 100 tons/day and sailing maybe 25 days a month, at 2,500 tons/month with savings of $400/ton, that’s $1 million a month,” Tolson said.

“In six months, you could pay off any scrubber.”


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