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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, 04 March 20
MARKET INSIGHT - INTERMODAL
As it was expected, the whole world has been focusing on the spread of the Coronavirus, with the fast outbreak being primarily a massive humanitari ...
Wednesday, 04 March 20
CORONAVIRUS: A WILDCARD FOR BULKS DEMAND - WOOD MACKENZIE
The coronavirus is casting a shadow across commodity markets. It has undermined China’s economic sentiment, putting the country’s growt ...
Wednesday, 04 March 20
THERMAL COAL TO 'PHASE OUT', STRONG DEMAND FOR COKING COAL: PLATO - SYDNEY MORNING HERALD
Plato Investments managing director Don Hamson says Australian iron ore producers are set to benefit in the fallout from coronavirus as China will ...
Wednesday, 04 March 20
CHINA PROVINCE TO CLOSE 10 MLN TONNES OF COAL CAPACITY IN 2020 - XINHUA
Southwest China’s Guizhou Province plans to phase out 10 million tonnes of outdated coal production capacity by closing 80 coal mines in 2020 ...
Wednesday, 04 March 20
UKRAINE PRODUCED OVER 2.55 MLN TONNES OF COAL IN FEBRUARY - UKRINFORM
In February 2020, Ukraine produced over 2.55 million tonnes of coal, which is 0.2% less than planned.
The Coal Miners Union of Ukrai ...
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- Tata Chemicals Ltd - India
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- GN Power Mariveles Coal Plant, Philippines
- Rashtriya Ispat Nigam Limited - India
- Kartika Selabumi Mining - Indonesia
- TeaM Sual Corporation - Philippines
- ASAPP Information Group - India
- Price Waterhouse Coopers - Russia
- Directorate General of MIneral and Coal - Indonesia
- GMR Energy Limited - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Globalindo Alam Lestari - Indonesia
- Leighton Contractors Pty Ltd - Australia
- Chamber of Mines of South Africa
- Goldman Sachs - Singapore
- Ministry of Finance - Indonesia
- Makarim & Taira - Indonesia
- Mercator Lines Limited - India
- SMG Consultants - Indonesia
- Formosa Plastics Group - Taiwan
- Kobexindo Tractors - Indoneisa
- Trasteel International SA, Italy
- Port Waratah Coal Services - Australia
- Economic Council, Georgia
- TNB Fuel Sdn Bhd - Malaysia
- Ministry of Transport, Egypt
- International Coal Ventures Pvt Ltd - India
- Kumho Petrochemical, South Korea
- Attock Cement Pakistan Limited
- Renaissance Capital - South Africa
- Power Finance Corporation Ltd., India
- The University of Queensland
- Aditya Birla Group - India
- Maheswari Brothers Coal Limited - India
- ICICI Bank Limited - India
- Bhushan Steel Limited - India
- IHS Mccloskey Coal Group - USA
- Billiton Holdings Pty Ltd - Australia
- Jaiprakash Power Ventures ltd
- The Treasury - Australian Government
- Directorate Of Revenue Intelligence - India
- Toyota Tsusho Corporation, Japan
- Madhucon Powers Ltd - India
- Ind-Barath Power Infra Limited - India
- Binh Thuan Hamico - Vietnam
- Miang Besar Coal Terminal - Indonesia
- Indika Energy - Indonesia
- Pendopo Energi Batubara - Indonesia
- Tamil Nadu electricity Board
- Therma Luzon, Inc, Philippines
- Bhatia International Limited - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- Riau Bara Harum - Indonesia
- Eastern Energy - Thailand
- Banpu Public Company Limited - Thailand
- Grasim Industreis Ltd - India
- OPG Power Generation Pvt Ltd - India
- Posco Energy - South Korea
- Sree Jayajothi Cements Limited - India
- Kalimantan Lumbung Energi - Indonesia
- Georgia Ports Authority, United States
- Gujarat Sidhee Cement - India
- The State Trading Corporation of India Ltd
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Thiess Contractors Indonesia
- Dalmia Cement Bharat India
- SMC Global Power, Philippines
- Offshore Bulk Terminal Pte Ltd, Singapore
- Siam City Cement - Thailand
- LBH Netherlands Bv - Netherlands
- CNBM International Corporation - China
- Marubeni Corporation - India
- Mintek Dendrill Indonesia
- Indian Oil Corporation Limited
- Karaikal Port Pvt Ltd - India
- Australian Coal Association
- Bulk Trading Sa - Switzerland
- Kaltim Prima Coal - Indonesia
- Indo Tambangraya Megah - Indonesia
- Vizag Seaport Private Limited - India
- Kepco SPC Power Corporation, Philippines
- Intertek Mineral Services - Indonesia
- Manunggal Multi Energi - Indonesia
- Cement Manufacturers Association - India
- Thai Mozambique Logistica
- Semirara Mining Corp, Philippines
- MS Steel International - UAE
- Deloitte Consulting - India
- Jorong Barutama Greston.PT - Indonesia
- Chettinad Cement Corporation Ltd - India
- Merrill Lynch Commodities Europe
- IEA Clean Coal Centre - UK
- London Commodity Brokers - England
- Indian Energy Exchange, India
- Star Paper Mills Limited - India
- Sakthi Sugars Limited - India
- Cigading International Bulk Terminal - Indonesia
- Kohat Cement Company Ltd. - Pakistan
- Electricity Authority, New Zealand
- India Bulls Power Limited - India
- Parliament of New Zealand
- Sindya Power Generating Company Private Ltd
- Ceylon Electricity Board - Sri Lanka
- Bangladesh Power Developement Board
- Medco Energi Mining Internasional
- Energy Link Ltd, New Zealand
- Altura Mining Limited, Indonesia
- Central Electricity Authority - India
- Bahari Cakrawala Sebuku - Indonesia
- Holcim Trading Pte Ltd - Singapore
- Coal and Oil Company - UAE
- Eastern Coal Council - USA
- Uttam Galva Steels Limited - India
- Essar Steel Hazira Ltd - India
- San Jose City I Power Corp, Philippines
- South Luzon Thermal Energy Corporation
- Global Business Power Corporation, Philippines
- Simpson Spence & Young - Indonesia
- Aboitiz Power Corporation - Philippines
- Bukit Baiduri Energy - Indonesia
- Commonwealth Bank - Australia
- Orica Australia Pty. Ltd.
- Samtan Co., Ltd - South Korea
- Lanco Infratech Ltd - India
- Bayan Resources Tbk. - Indonesia
- Neyveli Lignite Corporation Ltd, - India
- AsiaOL BioFuels Corp., Philippines
- Timah Investasi Mineral - Indoneisa
- Edison Trading Spa - Italy
- White Energy Company Limited
- Ambuja Cements Ltd - India
- Krishnapatnam Port Company Ltd. - India
- Africa Commodities Group - South Africa
- SN Aboitiz Power Inc, Philippines
- Jindal Steel & Power Ltd - India
- Vijayanagar Sugar Pvt Ltd - India
- Xindia Steels Limited - India
- Barasentosa Lestari - Indonesia
- Meenaskhi Energy Private Limited - India
- Petrochimia International Co. Ltd.- Taiwan
- Semirara Mining and Power Corporation, Philippines
- Petron Corporation, Philippines
- Borneo Indobara - Indonesia
- Sinarmas Energy and Mining - Indonesia
- Agrawal Coal Company - India
- Latin American Coal - Colombia
- Iligan Light & Power Inc, Philippines
- Vedanta Resources Plc - India
- Kideco Jaya Agung - Indonesia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Maharashtra Electricity Regulatory Commission - India
- Anglo American - United Kingdom
- Pipit Mutiara Jaya. PT, Indonesia
- Energy Development Corp, Philippines
- Wood Mackenzie - Singapore
- Independent Power Producers Association of India
- Savvy Resources Ltd - HongKong
- Bhoruka Overseas - Indonesia
- Bukit Makmur.PT - Indonesia
- Standard Chartered Bank - UAE
- Romanian Commodities Exchange
- Australian Commodity Traders Exchange
- Rio Tinto Coal - Australia
- PowerSource Philippines DevCo
- Bharathi Cement Corporation - India
- Indogreen Group - Indonesia
- Parry Sugars Refinery, India
- Wilmar Investment Holdings
- Larsen & Toubro Limited - India
- Straits Asia Resources Limited - Singapore
- Coastal Gujarat Power Limited - India
- Sojitz Corporation - Japan
- Salva Resources Pvt Ltd - India
- Ministry of Mines - Canada
- PetroVietnam Power Coal Import and Supply Company
- Bukit Asam (Persero) Tbk - Indonesia
- PNOC Exploration Corporation - Philippines
- Global Green Power PLC Corporation, Philippines
- McConnell Dowell - Australia
- Electricity Generating Authority of Thailand
- Indonesian Coal Mining Association
- PTC India Limited - India
- Minerals Council of Australia
- Kapuas Tunggal Persada - Indonesia
- European Bulk Services B.V. - Netherlands
- VISA Power Limited - India
- Global Coal Blending Company Limited - Australia
- Baramulti Group, Indonesia
- Singapore Mercantile Exchange
- Sical Logistics Limited - India
- Oldendorff Carriers - Singapore
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Antam Resourcindo - Indonesia
- Heidelberg Cement - Germany
- Gujarat Electricity Regulatory Commission - India
- GVK Power & Infra Limited - India
- Interocean Group of Companies - India
- New Zealand Coal & Carbon
- Central Java Power - Indonesia
- Meralco Power Generation, Philippines
- Carbofer General Trading SA - India
- Mercuria Energy - Indonesia
- Metalloyd Limited - United Kingdom
- Asmin Koalindo Tuhup - Indonesia
- Siam City Cement PLC, Thailand
- Sarangani Energy Corporation, Philippines
- Coalindo Energy - Indonesia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Malabar Cements Ltd - India
- Mjunction Services Limited - India
- GAC Shipping (India) Pvt Ltd
- CIMB Investment Bank - Malaysia
- Orica Mining Services - Indonesia
- Alfred C Toepfer International GmbH - Germany
- Karbindo Abesyapradhi - Indoneisa
- Planning Commission, India
- Gujarat Mineral Development Corp Ltd - India
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