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Saturday, 22 February 20
THE SURPRISING MOVE IN MARINE FUEL SPREADS - ING
Middle distillates tank
One of the biggest surprises since the implementation of new International Maritime Organization (IMO) sulphur regulations is the weakness we have seen in the middle distillate market. Expectations were that we would see a large share of the shipping industry shift to marine gasoil, which would be a bullish scenario for middle distillate cracks. Instead, gasoil cracks are trading at levels last seen in 2017, falling by more than 50% from their October 2019 highs. A milder than usual winter, and the outbreak of the COVID-19 virus are just two factors adding further pressure on middle distillates.
However, from a shipping perspective, one of the key reasons why we have not seen strength in the market is the fact that demand for very low sulphur fuel oil (VLSFO) has been stronger than expected. As a result, the pick-up in marine gasoil demand has not been as much as anticipated. This has happened despite several reports of off-spec VLSFO. There also appears to be an element of hesitancy to more towards marine gasoil, with concerns over viscosity. This is evident in Asia, where we have seen VLSFO actually trading at a premium to marine gasoil.
Fuel oil cracks rally
While we have seen weakness in middle of the barrel products, fuel oil has strengthened, defying market expectations. The prompt crack in NW Europe has traded from around a US$30/bbl discount late last year to less than a US$15/bbl discount currently. There are several reasons behind this strength.
Firstly, refiners would have made any adjustments they could, be it through refinery upgrades, or adjusting feedstock accordingly to minimise HSFO yields as we moved into 2020.
Secondly, there has been increased interest from US refiners to process HSFO and, looking at fuel oil imports into the US over the last few months, particularly towards the end of 2019, volumes did increase. This move does also appear to reflect the limited availability of heavier crude grades for refiners in the US Gulf, given US sanctions against Venezuela.
Thirdly, and this certainly shouldn’t come as too much of a surprise, we see more ships with scrubbers installed coming online. This would provide some additional support to the demand picture for HSFO. The coronavirus could even have an impact here, with a potential delay in scrubber installations.
Finally, a factor which was more of a risk than a reality was the potential for the US not to extend waivers which allow Iraq to import natural gas and electricity from Iran. If this were to happen, it would likely mean that Iraqi domestic fuel oil consumption would increase for power generation needs, so reducing export availability of fuel oil from the country. The risk of this happening has eased, however, with the US recently extending waivers by another 45 days.
China VLSFO supply set to rise
The VLSFO market was performing well until news that China would provide tax waivers to refiners in the country for lower sulphur fuel oil production, which has set the path for VLSFO output in China to grow. Already there are reports that PetroChina has delivered volumes of VLSFO into bonded storage, where it will likely be retailed to ships. The idea is that China wants to build its capabilities as a bunkering hub, rather than wholesale exports of VLSFO.
What has this all meant for spreads?
The above dynamics have had an impact on marine fuel spreads. The more bearish environment we have seen in the middle distillate market, along with a more constructive HSFO market, has meant that the spot NW Europe gasoil-HSFO spread has narrowed from around US$400/t at certain stages last year to around US$235/t currently. Meanwhile, pressure from potential Chinese VLSFO supply has had a similar impact on the spot VLSFO-HSFO spread, with it falling from a high of US$290/t late last year to around US$165/t currently. Obviously, these narrower spreads increase the payback period for a scrubber, making the economics of an installation not as attractive as it looked last year.
As we see more scrubber fitted ships coming online, it will increasingly eat into the advantage of burning HSFO. Therefore, we believe the spreads are unlikely to trade back out to the highs seen last year.
Source: ING
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Wednesday, 18 March 20
SHIPPING MARKET INSIGHT - INTERMODAL
Despite we all knew about the Covid-19 weeks ago, few could realize the size of the thread until the last few days. The examples of China and Italy ...
Tuesday, 17 March 20
IT IS NOW UNQUESTIONABLE THAT 2020 WILL BE A MILESTONE YEAR FOR THE OIL MARKET, AS WELL AS THE WHOLE GLOBAL ECONOMY - ALLIED
It is now unquestionable that 2020 will be a milestone year for the oil market, as well as the whole global economy. The impact from the COVID-19 o ...
Tuesday, 17 March 20
PRELIMINARY FIELD EXPERIENCES ON THE EFFECTS OF LSFO AND VLSFO ON CYLINDER CONDITION - HANS JENSEN LUBRICATORS
It is now more than two months since the 0.5% sulphur cap entered into force, which have affected the operation of more than 70,000 vessels. As ant ...
Monday, 16 March 20
ULTRAMAX: S8 INDONESIA-INDIA AND S10 INDONESIA-CHINA ROUTES BOTH POSTED GAINS OF $1,412, AND $1,289 ON THE WEEK, TO CLOSE AT $5,575, AND $6,089 RESPECTIVELY - BALTIC BRIEFING
Capesize
The Capesize market came to work on Monday, with little expectation, or confidence, that the days ahead were going to bring anything o ...
Sunday, 15 March 20
CAPTIVE COAL OUTPUT RISES 19% IN APRIL-FEBRUARY - FINANCIAL EXPRESS
Coal production from captive mines in the first eleven months of the ongoing fiscal have increased by 18.8% year-on-year (y-o-y) to 51.7 million to ...
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- Maheswari Brothers Coal Limited - India
- Kaltim Prima Coal - Indonesia
- Siam City Cement PLC, Thailand
- Rashtriya Ispat Nigam Limited - India
- LBH Netherlands Bv - Netherlands
- Lanco Infratech Ltd - India
- Petrochimia International Co. Ltd.- Taiwan
- Makarim & Taira - Indonesia
- Merrill Lynch Commodities Europe
- San Jose City I Power Corp, Philippines
- Salva Resources Pvt Ltd - India
- Parry Sugars Refinery, India
- New Zealand Coal & Carbon
- Krishnapatnam Port Company Ltd. - India
- Attock Cement Pakistan Limited
- Electricity Generating Authority of Thailand
- Singapore Mercantile Exchange
- Kobexindo Tractors - Indoneisa
- Straits Asia Resources Limited - Singapore
- Kalimantan Lumbung Energi - Indonesia
- Kartika Selabumi Mining - Indonesia
- Bukit Baiduri Energy - Indonesia
- GMR Energy Limited - India
- Binh Thuan Hamico - Vietnam
- Directorate General of MIneral and Coal - Indonesia
- Cigading International Bulk Terminal - Indonesia
- Sinarmas Energy and Mining - Indonesia
- Kohat Cement Company Ltd. - Pakistan
- Mercator Lines Limited - India
- Gujarat Mineral Development Corp Ltd - India
- CNBM International Corporation - China
- Malabar Cements Ltd - India
- Bangladesh Power Developement Board
- Globalindo Alam Lestari - Indonesia
- Bhoruka Overseas - Indonesia
- CIMB Investment Bank - Malaysia
- Sojitz Corporation - Japan
- Bukit Makmur.PT - Indonesia
- Thiess Contractors Indonesia
- Mintek Dendrill Indonesia
- Manunggal Multi Energi - Indonesia
- Coalindo Energy - Indonesia
- Commonwealth Bank - Australia
- Ministry of Mines - Canada
- Chamber of Mines of South Africa
- Indo Tambangraya Megah - Indonesia
- Ambuja Cements Ltd - India
- Planning Commission, India
- Economic Council, Georgia
- Indogreen Group - Indonesia
- Cement Manufacturers Association - India
- London Commodity Brokers - England
- Independent Power Producers Association of India
- Indian Energy Exchange, India
- Eastern Energy - Thailand
- Posco Energy - South Korea
- Parliament of New Zealand
- ICICI Bank Limited - India
- Central Electricity Authority - India
- Tamil Nadu electricity Board
- Kepco SPC Power Corporation, Philippines
- PetroVietnam Power Coal Import and Supply Company
- Leighton Contractors Pty Ltd - Australia
- South Luzon Thermal Energy Corporation
- PowerSource Philippines DevCo
- IHS Mccloskey Coal Group - USA
- Barasentosa Lestari - Indonesia
- Offshore Bulk Terminal Pte Ltd, Singapore
- Mercuria Energy - Indonesia
- Intertek Mineral Services - Indonesia
- Deloitte Consulting - India
- Directorate Of Revenue Intelligence - India
- Simpson Spence & Young - Indonesia
- Renaissance Capital - South Africa
- Vizag Seaport Private Limited - India
- Bhatia International Limited - India
- The University of Queensland
- OPG Power Generation Pvt Ltd - India
- Metalloyd Limited - United Kingdom
- Trasteel International SA, Italy
- Pipit Mutiara Jaya. PT, Indonesia
- IEA Clean Coal Centre - UK
- Miang Besar Coal Terminal - Indonesia
- Alfred C Toepfer International GmbH - Germany
- Vedanta Resources Plc - India
- Sarangani Energy Corporation, Philippines
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Price Waterhouse Coopers - Russia
- European Bulk Services B.V. - Netherlands
- Sindya Power Generating Company Private Ltd
- Eastern Coal Council - USA
- Meralco Power Generation, Philippines
- Minerals Council of Australia
- TNB Fuel Sdn Bhd - Malaysia
- PTC India Limited - India
- SN Aboitiz Power Inc, Philippines
- Iligan Light & Power Inc, Philippines
- Samtan Co., Ltd - South Korea
- Ministry of Finance - Indonesia
- Kideco Jaya Agung - Indonesia
- Wood Mackenzie - Singapore
- Orica Australia Pty. Ltd.
- Antam Resourcindo - Indonesia
- Ceylon Electricity Board - Sri Lanka
- Karbindo Abesyapradhi - Indoneisa
- Borneo Indobara - Indonesia
- Therma Luzon, Inc, Philippines
- Chettinad Cement Corporation Ltd - India
- Goldman Sachs - Singapore
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- TeaM Sual Corporation - Philippines
- Energy Link Ltd, New Zealand
- Toyota Tsusho Corporation, Japan
- Wilmar Investment Holdings
- Asia Pacific Energy Resources Ventures Inc, Philippines
- SMC Global Power, Philippines
- Gujarat Electricity Regulatory Commission - India
- Videocon Industries ltd - India
- Ind-Barath Power Infra Limited - India
- Vijayanagar Sugar Pvt Ltd - India
- Jaiprakash Power Ventures ltd
- Asmin Koalindo Tuhup - Indonesia
- VISA Power Limited - India
- Australian Commodity Traders Exchange
- Agrawal Coal Company - India
- Siam City Cement - Thailand
- AsiaOL BioFuels Corp., Philippines
- PNOC Exploration Corporation - Philippines
- SMG Consultants - Indonesia
- ASAPP Information Group - India
- Energy Development Corp, Philippines
- Sical Logistics Limited - India
- Sree Jayajothi Cements Limited - India
- Larsen & Toubro Limited - India
- Bukit Asam (Persero) Tbk - Indonesia
- Indonesian Coal Mining Association
- Bulk Trading Sa - Switzerland
- Romanian Commodities Exchange
- Jorong Barutama Greston.PT - Indonesia
- Indian Oil Corporation Limited
- Mjunction Services Limited - India
- Formosa Plastics Group - Taiwan
- Kumho Petrochemical, South Korea
- GN Power Mariveles Coal Plant, Philippines
- Bayan Resources Tbk. - Indonesia
- Coal and Oil Company - UAE
- GVK Power & Infra Limited - India
- Anglo American - United Kingdom
- Bank of Tokyo Mitsubishi UFJ Ltd
- Bhushan Steel Limited - India
- The Treasury - Australian Government
- Heidelberg Cement - Germany
- Neyveli Lignite Corporation Ltd, - India
- Madhucon Powers Ltd - India
- Baramulti Group, Indonesia
- Bahari Cakrawala Sebuku - Indonesia
- Riau Bara Harum - Indonesia
- Oldendorff Carriers - Singapore
- Karaikal Port Pvt Ltd - India
- Thai Mozambique Logistica
- Kapuas Tunggal Persada - Indonesia
- Medco Energi Mining Internasional
- Electricity Authority, New Zealand
- Uttam Galva Steels Limited - India
- Pendopo Energi Batubara - Indonesia
- Billiton Holdings Pty Ltd - Australia
- Dalmia Cement Bharat India
- Tata Chemicals Ltd - India
- Power Finance Corporation Ltd., India
- McConnell Dowell - Australia
- Latin American Coal - Colombia
- Altura Mining Limited, Indonesia
- Bharathi Cement Corporation - India
- MS Steel International - UAE
- Rio Tinto Coal - Australia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Maharashtra Electricity Regulatory Commission - India
- Marubeni Corporation - India
- Jindal Steel & Power Ltd - India
- White Energy Company Limited
- Gujarat Sidhee Cement - India
- Port Waratah Coal Services - Australia
- Sakthi Sugars Limited - India
- Savvy Resources Ltd - HongKong
- Standard Chartered Bank - UAE
- Central Java Power - Indonesia
- Semirara Mining and Power Corporation, Philippines
- Carbofer General Trading SA - India
- International Coal Ventures Pvt Ltd - India
- India Bulls Power Limited - India
- Xindia Steels Limited - India
- Ministry of Transport, Egypt
- Holcim Trading Pte Ltd - Singapore
- Banpu Public Company Limited - Thailand
- Global Coal Blending Company Limited - Australia
- Aboitiz Power Corporation - Philippines
- Petron Corporation, Philippines
- Grasim Industreis Ltd - India
- GAC Shipping (India) Pvt Ltd
- Africa Commodities Group - South Africa
- The State Trading Corporation of India Ltd
- Global Business Power Corporation, Philippines
- Global Green Power PLC Corporation, Philippines
- Coastal Gujarat Power Limited - India
- Australian Coal Association
- Orica Mining Services - Indonesia
- Star Paper Mills Limited - India
- Indika Energy - Indonesia
- Interocean Group of Companies - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Meenaskhi Energy Private Limited - India
- Timah Investasi Mineral - Indoneisa
- Georgia Ports Authority, United States
- Semirara Mining Corp, Philippines
- Edison Trading Spa - Italy
- Essar Steel Hazira Ltd - India
- Aditya Birla Group - India
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