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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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Thursday, 05 March 20
SEABORNE COAL'S STRUGGLES IN ASIA ARE MORE THAN JUST CHINA CORONAVIRUS - REUTERS
Asia’s seaborne coal markets stumbled in February and it appears the coronavirus outbreak in China may dodge most of the blame, with the weak ...
Thursday, 05 March 20
INDONESIA'S BUKIT ASAM 2019 OUTPUT RISES 10.2% Y/Y - REUTERS
PT Bukit Asam, Indonesia’s state-owned coal miner, said on Wednesday its output in 2019 rose 10.2% to 29.1 million tonnes.
Coa ...
Thursday, 05 March 20
SEEING REMOTELY - IN SAFETY: BUREAU VERITAS PERFORMS FIRST SURVEY BY DRONE - BUREAU VERITAS
Bureau Veritas Marine & Offshore (BV), a world leader in testing, inspection and certification (TIC) services has completed its first survey by ...
Wednesday, 04 March 20
AN EPIDEMIC OF UNCERTAINTY - THE CORONAVIRUS AND FORCE MAJEURE - WFW
KNOWLEDGE TO ELEVATE
Do the effects of the coronavirus give rise to legitimate force majeure claims in connection with shipbuilding contracts ...
Wednesday, 04 March 20
CHINA IMPORTED 76.8 MLN TONNES OF CRUDE OIL FOR JANUARY & FEBRUARY 2020; UP 3.4% YOY - REFINITIV | BC
The COVID-19 crisis has been gripping China already for almost two months now. It’s having a huge negative impact on the economy, and this is ...
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- Manunggal Multi Energi - Indonesia
- Orica Australia Pty. Ltd.
- Leighton Contractors Pty Ltd - Australia
- Bharathi Cement Corporation - India
- Agrawal Coal Company - India
- Neyveli Lignite Corporation Ltd, - India
- Gujarat Electricity Regulatory Commission - India
- Asmin Koalindo Tuhup - Indonesia
- Cigading International Bulk Terminal - Indonesia
- The State Trading Corporation of India Ltd
- Global Coal Blending Company Limited - Australia
- Independent Power Producers Association of India
- SMC Global Power, Philippines
- Energy Link Ltd, New Zealand
- Global Green Power PLC Corporation, Philippines
- Simpson Spence & Young - Indonesia
- Jorong Barutama Greston.PT - Indonesia
- Therma Luzon, Inc, Philippines
- Miang Besar Coal Terminal - Indonesia
- Bangladesh Power Developement Board
- Meenaskhi Energy Private Limited - India
- Pipit Mutiara Jaya. PT, Indonesia
- Merrill Lynch Commodities Europe
- Coal and Oil Company - UAE
- Directorate General of MIneral and Coal - Indonesia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Uttam Galva Steels Limited - India
- Vizag Seaport Private Limited - India
- Anglo American - United Kingdom
- IEA Clean Coal Centre - UK
- Pendopo Energi Batubara - Indonesia
- Larsen & Toubro Limited - India
- Central Java Power - Indonesia
- Bukit Makmur.PT - Indonesia
- Chettinad Cement Corporation Ltd - India
- Kohat Cement Company Ltd. - Pakistan
- ICICI Bank Limited - India
- Bhoruka Overseas - Indonesia
- Romanian Commodities Exchange
- Thiess Contractors Indonesia
- Mercuria Energy - Indonesia
- Aditya Birla Group - India
- Coalindo Energy - Indonesia
- Coastal Gujarat Power Limited - India
- Vijayanagar Sugar Pvt Ltd - India
- Kobexindo Tractors - Indoneisa
- White Energy Company Limited
- PetroVietnam Power Coal Import and Supply Company
- South Luzon Thermal Energy Corporation
- Holcim Trading Pte Ltd - Singapore
- CNBM International Corporation - China
- Trasteel International SA, Italy
- Mercator Lines Limited - India
- Kalimantan Lumbung Energi - Indonesia
- Rashtriya Ispat Nigam Limited - India
- Siam City Cement - Thailand
- OPG Power Generation Pvt Ltd - India
- The University of Queensland
- AsiaOL BioFuels Corp., Philippines
- Carbofer General Trading SA - India
- European Bulk Services B.V. - Netherlands
- Posco Energy - South Korea
- Rio Tinto Coal - Australia
- Sindya Power Generating Company Private Ltd
- GMR Energy Limited - India
- TNB Fuel Sdn Bhd - Malaysia
- Riau Bara Harum - Indonesia
- SMG Consultants - Indonesia
- Bahari Cakrawala Sebuku - Indonesia
- Ceylon Electricity Board - Sri Lanka
- The Treasury - Australian Government
- Sojitz Corporation - Japan
- Eastern Energy - Thailand
- Power Finance Corporation Ltd., India
- Eastern Coal Council - USA
- Medco Energi Mining Internasional
- Alfred C Toepfer International GmbH - Germany
- Petrochimia International Co. Ltd.- Taiwan
- Australian Commodity Traders Exchange
- Sical Logistics Limited - India
- International Coal Ventures Pvt Ltd - India
- Baramulti Group, Indonesia
- Metalloyd Limited - United Kingdom
- Parliament of New Zealand
- Indian Oil Corporation Limited
- MS Steel International - UAE
- Orica Mining Services - Indonesia
- Renaissance Capital - South Africa
- Jaiprakash Power Ventures ltd
- Straits Asia Resources Limited - Singapore
- Petron Corporation, Philippines
- Essar Steel Hazira Ltd - India
- Heidelberg Cement - Germany
- Wilmar Investment Holdings
- Bhatia International Limited - India
- Bukit Asam (Persero) Tbk - Indonesia
- Indogreen Group - Indonesia
- Ministry of Transport, Egypt
- Ministry of Finance - Indonesia
- Attock Cement Pakistan Limited
- Planning Commission, India
- Marubeni Corporation - India
- Krishnapatnam Port Company Ltd. - India
- Star Paper Mills Limited - India
- Jindal Steel & Power Ltd - India
- Bhushan Steel Limited - India
- Electricity Generating Authority of Thailand
- Mintek Dendrill Indonesia
- Karbindo Abesyapradhi - Indoneisa
- Banpu Public Company Limited - Thailand
- Siam City Cement PLC, Thailand
- Thai Mozambique Logistica
- Salva Resources Pvt Ltd - India
- Maharashtra Electricity Regulatory Commission - India
- Karaikal Port Pvt Ltd - India
- GVK Power & Infra Limited - India
- San Jose City I Power Corp, Philippines
- Semirara Mining and Power Corporation, Philippines
- India Bulls Power Limited - India
- Globalindo Alam Lestari - Indonesia
- Sree Jayajothi Cements Limited - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Xindia Steels Limited - India
- Videocon Industries ltd - India
- Goldman Sachs - Singapore
- Offshore Bulk Terminal Pte Ltd, Singapore
- CIMB Investment Bank - Malaysia
- Billiton Holdings Pty Ltd - Australia
- Antam Resourcindo - Indonesia
- Borneo Indobara - Indonesia
- Gujarat Sidhee Cement - India
- Kepco SPC Power Corporation, Philippines
- Savvy Resources Ltd - HongKong
- Asia Pacific Energy Resources Ventures Inc, Philippines
- PNOC Exploration Corporation - Philippines
- Intertek Mineral Services - Indonesia
- Central Electricity Authority - India
- TeaM Sual Corporation - Philippines
- Bulk Trading Sa - Switzerland
- Wood Mackenzie - Singapore
- Edison Trading Spa - Italy
- Australian Coal Association
- ASAPP Information Group - India
- Barasentosa Lestari - Indonesia
- Tata Chemicals Ltd - India
- Aboitiz Power Corporation - Philippines
- Kaltim Prima Coal - Indonesia
- Lanco Infratech Ltd - India
- Samtan Co., Ltd - South Korea
- LBH Netherlands Bv - Netherlands
- Bank of Tokyo Mitsubishi UFJ Ltd
- Malabar Cements Ltd - India
- Standard Chartered Bank - UAE
- Africa Commodities Group - South Africa
- GAC Shipping (India) Pvt Ltd
- Minerals Council of Australia
- Binh Thuan Hamico - Vietnam
- Mjunction Services Limited - India
- Cement Manufacturers Association - India
- Kapuas Tunggal Persada - Indonesia
- Kumho Petrochemical, South Korea
- Kideco Jaya Agung - Indonesia
- Altura Mining Limited, Indonesia
- Oldendorff Carriers - Singapore
- Sarangani Energy Corporation, Philippines
- Economic Council, Georgia
- Port Waratah Coal Services - Australia
- Timah Investasi Mineral - Indoneisa
- Tamil Nadu electricity Board
- Singapore Mercantile Exchange
- PowerSource Philippines DevCo
- Bayan Resources Tbk. - Indonesia
- Indian Energy Exchange, India
- Formosa Plastics Group - Taiwan
- Maheswari Brothers Coal Limited - India
- SN Aboitiz Power Inc, Philippines
- McConnell Dowell - Australia
- Directorate Of Revenue Intelligence - India
- Makarim & Taira - Indonesia
- Sinarmas Energy and Mining - Indonesia
- Madhucon Powers Ltd - India
- Price Waterhouse Coopers - Russia
- Meralco Power Generation, Philippines
- Ind-Barath Power Infra Limited - India
- Deloitte Consulting - India
- Ministry of Mines - Canada
- Indo Tambangraya Megah - Indonesia
- Iligan Light & Power Inc, Philippines
- Commonwealth Bank - Australia
- GN Power Mariveles Coal Plant, Philippines
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Semirara Mining Corp, Philippines
- Gujarat Mineral Development Corp Ltd - India
- Sakthi Sugars Limited - India
- IHS Mccloskey Coal Group - USA
- Interocean Group of Companies - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Parry Sugars Refinery, India
- New Zealand Coal & Carbon
- Energy Development Corp, Philippines
- Toyota Tsusho Corporation, Japan
- Latin American Coal - Colombia
- Electricity Authority, New Zealand
- Grasim Industreis Ltd - India
- Kartika Selabumi Mining - Indonesia
- Ambuja Cements Ltd - India
- London Commodity Brokers - England
- Indika Energy - Indonesia
- PTC India Limited - India
- Indonesian Coal Mining Association
- Global Business Power Corporation, Philippines
- Chamber of Mines of South Africa
- Georgia Ports Authority, United States
- VISA Power Limited - India
- Dalmia Cement Bharat India
- Bukit Baiduri Energy - Indonesia
- Vedanta Resources Plc - India
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