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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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Tuesday, 03 March 20
IMPORTANCE OF MASTER'S CARGO CHECKS - BALTIC EXCHANGE
KNOWLEDGE TO ELEVATE
Adecision in recent High Court case has made it clear that there is no implied indemnity from a charterer to their counte ...
Tuesday, 03 March 20
COAL'S SHARE OF CHINA ENERGY MIX FALLS IN 2019 BUT CONSUMPTION STILL RISING - REUTERS
Coal accounted for 57.7% of China’s primary energy consumption in 2019, the National Bureau of Statistics said on Friday, down 1.5 percentage ...
Monday, 02 March 20
SHIPOWNERS AND OPERATORS COULD FACE DETENTION OF SHIPS FROM 1ST MARCH UNDER IMO RULE - ICS
Port state control authorities will begin to enforce the IMO’s Sulphur 2020 from 1st March, making it an offense for ships to carry fuel that ...
Saturday, 29 February 20
SUPRAMAX SENTIMENT WAS UP IN A FEW KEY AREAS OVER THE LAST WEEK - BALTIC BRIEFING
Capesize
The Capesize market woes related to Coronavirus have now spread through the wider global markets like wildfire. The wider supply and d ...
Thursday, 27 February 20
FOREIGN COMPANIES LIKELY TO SKIP COMMERCIAL COAL BLOCK AUCTIONS - ECONOMIC TIMES
The Centre is in the process of inviting global players for commercial mining, following 100% foreign direct investment in the sector. However, giv ...
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- Antam Resourcindo - Indonesia
- Ceylon Electricity Board - Sri Lanka
- Karaikal Port Pvt Ltd - India
- Globalindo Alam Lestari - Indonesia
- Chettinad Cement Corporation Ltd - India
- Australian Commodity Traders Exchange
- ICICI Bank Limited - India
- Sinarmas Energy and Mining - Indonesia
- Sree Jayajothi Cements Limited - India
- Grasim Industreis Ltd - India
- TeaM Sual Corporation - Philippines
- Port Waratah Coal Services - Australia
- Meenaskhi Energy Private Limited - India
- Tamil Nadu electricity Board
- GN Power Mariveles Coal Plant, Philippines
- Kaltim Prima Coal - Indonesia
- Standard Chartered Bank - UAE
- Chamber of Mines of South Africa
- Heidelberg Cement - Germany
- Cement Manufacturers Association - India
- The University of Queensland
- The Treasury - Australian Government
- PTC India Limited - India
- Dalmia Cement Bharat India
- Siam City Cement PLC, Thailand
- Malabar Cements Ltd - India
- AsiaOL BioFuels Corp., Philippines
- Makarim & Taira - Indonesia
- Global Green Power PLC Corporation, Philippines
- Energy Development Corp, Philippines
- Singapore Mercantile Exchange
- LBH Netherlands Bv - Netherlands
- Offshore Bulk Terminal Pte Ltd, Singapore
- International Coal Ventures Pvt Ltd - India
- Edison Trading Spa - Italy
- Maheswari Brothers Coal Limited - India
- Indian Oil Corporation Limited
- OPG Power Generation Pvt Ltd - India
- Coastal Gujarat Power Limited - India
- Leighton Contractors Pty Ltd - Australia
- Ambuja Cements Ltd - India
- Coal and Oil Company - UAE
- Banpu Public Company Limited - Thailand
- PetroVietnam Power Coal Import and Supply Company
- Pendopo Energi Batubara - Indonesia
- Baramulti Group, Indonesia
- Semirara Mining Corp, Philippines
- Intertek Mineral Services - Indonesia
- Bhatia International Limited - India
- Central Electricity Authority - India
- Jorong Barutama Greston.PT - Indonesia
- Neyveli Lignite Corporation Ltd, - India
- Merrill Lynch Commodities Europe
- Orica Australia Pty. Ltd.
- Posco Energy - South Korea
- Goldman Sachs - Singapore
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Billiton Holdings Pty Ltd - Australia
- Holcim Trading Pte Ltd - Singapore
- Jaiprakash Power Ventures ltd
- SMG Consultants - Indonesia
- Ind-Barath Power Infra Limited - India
- Simpson Spence & Young - Indonesia
- Aboitiz Power Corporation - Philippines
- Binh Thuan Hamico - Vietnam
- Indogreen Group - Indonesia
- Xindia Steels Limited - India
- Mercator Lines Limited - India
- Sindya Power Generating Company Private Ltd
- Kartika Selabumi Mining - Indonesia
- SN Aboitiz Power Inc, Philippines
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Trasteel International SA, Italy
- Global Business Power Corporation, Philippines
- Jindal Steel & Power Ltd - India
- Bhushan Steel Limited - India
- Kepco SPC Power Corporation, Philippines
- Directorate General of MIneral and Coal - Indonesia
- Lanco Infratech Ltd - India
- South Luzon Thermal Energy Corporation
- Petron Corporation, Philippines
- Bhoruka Overseas - Indonesia
- Gujarat Mineral Development Corp Ltd - India
- Sakthi Sugars Limited - India
- Bukit Asam (Persero) Tbk - Indonesia
- Wilmar Investment Holdings
- Economic Council, Georgia
- Gujarat Electricity Regulatory Commission - India
- Kapuas Tunggal Persada - Indonesia
- Eastern Energy - Thailand
- Australian Coal Association
- Bukit Makmur.PT - Indonesia
- Riau Bara Harum - Indonesia
- Price Waterhouse Coopers - Russia
- Essar Steel Hazira Ltd - India
- Ministry of Finance - Indonesia
- Barasentosa Lestari - Indonesia
- Global Coal Blending Company Limited - Australia
- Thiess Contractors Indonesia
- Georgia Ports Authority, United States
- Bulk Trading Sa - Switzerland
- New Zealand Coal & Carbon
- ASAPP Information Group - India
- Indonesian Coal Mining Association
- London Commodity Brokers - England
- IEA Clean Coal Centre - UK
- Borneo Indobara - Indonesia
- The State Trading Corporation of India Ltd
- IHS Mccloskey Coal Group - USA
- European Bulk Services B.V. - Netherlands
- Bangladesh Power Developement Board
- GVK Power & Infra Limited - India
- VISA Power Limited - India
- GMR Energy Limited - India
- SMC Global Power, Philippines
- Electricity Generating Authority of Thailand
- White Energy Company Limited
- Oldendorff Carriers - Singapore
- Mintek Dendrill Indonesia
- Carbofer General Trading SA - India
- Petrochimia International Co. Ltd.- Taiwan
- Parliament of New Zealand
- Sojitz Corporation - Japan
- Asmin Koalindo Tuhup - Indonesia
- Independent Power Producers Association of India
- PowerSource Philippines DevCo
- Aditya Birla Group - India
- Star Paper Mills Limited - India
- CIMB Investment Bank - Malaysia
- Krishnapatnam Port Company Ltd. - India
- Kohat Cement Company Ltd. - Pakistan
- Central Java Power - Indonesia
- Samtan Co., Ltd - South Korea
- Indo Tambangraya Megah - Indonesia
- Kalimantan Lumbung Energi - Indonesia
- Semirara Mining and Power Corporation, Philippines
- Marubeni Corporation - India
- Agrawal Coal Company - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Karbindo Abesyapradhi - Indoneisa
- Sarangani Energy Corporation, Philippines
- Wood Mackenzie - Singapore
- Bank of Tokyo Mitsubishi UFJ Ltd
- Eastern Coal Council - USA
- Meralco Power Generation, Philippines
- Miang Besar Coal Terminal - Indonesia
- Kumho Petrochemical, South Korea
- McConnell Dowell - Australia
- Africa Commodities Group - South Africa
- San Jose City I Power Corp, Philippines
- Therma Luzon, Inc, Philippines
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Commonwealth Bank - Australia
- Romanian Commodities Exchange
- Kobexindo Tractors - Indoneisa
- Ministry of Transport, Egypt
- Indika Energy - Indonesia
- Sical Logistics Limited - India
- TNB Fuel Sdn Bhd - Malaysia
- Kideco Jaya Agung - Indonesia
- Pipit Mutiara Jaya. PT, Indonesia
- MS Steel International - UAE
- Attock Cement Pakistan Limited
- Iligan Light & Power Inc, Philippines
- Indian Energy Exchange, India
- Mjunction Services Limited - India
- Electricity Authority, New Zealand
- Bayan Resources Tbk. - Indonesia
- Latin American Coal - Colombia
- Rio Tinto Coal - Australia
- Vedanta Resources Plc - India
- Tata Chemicals Ltd - India
- Siam City Cement - Thailand
- Madhucon Powers Ltd - India
- Formosa Plastics Group - Taiwan
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- GAC Shipping (India) Pvt Ltd
- Power Finance Corporation Ltd., India
- Renaissance Capital - South Africa
- Vizag Seaport Private Limited - India
- Timah Investasi Mineral - Indoneisa
- Savvy Resources Ltd - HongKong
- CNBM International Corporation - China
- Vijayanagar Sugar Pvt Ltd - India
- Toyota Tsusho Corporation, Japan
- Mercuria Energy - Indonesia
- Bahari Cakrawala Sebuku - Indonesia
- Directorate Of Revenue Intelligence - India
- Larsen & Toubro Limited - India
- Maharashtra Electricity Regulatory Commission - India
- Deloitte Consulting - India
- Salva Resources Pvt Ltd - India
- Coalindo Energy - Indonesia
- Minerals Council of Australia
- Straits Asia Resources Limited - Singapore
- Metalloyd Limited - United Kingdom
- Ministry of Mines - Canada
- Bharathi Cement Corporation - India
- India Bulls Power Limited - India
- Altura Mining Limited, Indonesia
- Energy Link Ltd, New Zealand
- Interocean Group of Companies - India
- Orica Mining Services - Indonesia
- Thai Mozambique Logistica
- Alfred C Toepfer International GmbH - Germany
- Parry Sugars Refinery, India
- Rashtriya Ispat Nigam Limited - India
- Cigading International Bulk Terminal - Indonesia
- Manunggal Multi Energi - Indonesia
- PNOC Exploration Corporation - Philippines
- Gujarat Sidhee Cement - India
- Planning Commission, India
- Bukit Baiduri Energy - Indonesia
- Medco Energi Mining Internasional
- Anglo American - United Kingdom
- Videocon Industries ltd - India
- Uttam Galva Steels Limited - India
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