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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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Monday, 24 February 20
CHINA SAYS MAJOR COAL FIRMS RESTORE 95% OF PRODUCTION CAPACITY - REUTERS
China’s coal companies controlled by the central government have resumed operations and are back at more than 95% of their capacity, an offic ...
Sunday, 23 February 20
SHIPPING INDUSTRY FACES $370 MILLION HIT FROM NEW PANAMA CANAL CHARGE - REUTERS
A new “freshwater” charge that came in this month to help the Panama Canal cope with climate change will cost the shipping industry up ...
Sunday, 23 February 20
A 57,000DWT SHIP FIXING DELIVERY SOUTH KALIMANTAN TRIP, REDELIVERY CJK, AT $7,600 - BALTIC BRIEFING
Capesize
The Capesize market found little to cheer about this week as it again endured remarkable lows. The Atlantic continued to improve, with ...
Friday, 21 February 20
CAPE: AVERAGE NOMINAL DAILY EARNINGS STILL ADMITTEDLY UNCHANGED W-O-W AT BELOW US$3000 - FEARNLEYS
CAPE
The worst may just about be over for the big ships. Average nominal daily earnings still admittedly unchanged w-o-w at below US$3k, but sent ...
Friday, 21 February 20
INDIA: POTENTIAL INVESTORS SEEK MORE CLARITY ON COMMERCIAL COAL MINING NORMS - FINANCIAL EXPRESS
Potential private investors have sought more clarity on the pricing mechanism proposed for the much-anticipated auction for commercial coal mining. ...
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- Maharashtra Electricity Regulatory Commission - India
- AsiaOL BioFuels Corp., Philippines
- Riau Bara Harum - Indonesia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Dalmia Cement Bharat India
- Holcim Trading Pte Ltd - Singapore
- Thai Mozambique Logistica
- Posco Energy - South Korea
- Ambuja Cements Ltd - India
- Economic Council, Georgia
- Sojitz Corporation - Japan
- GVK Power & Infra Limited - India
- The University of Queensland
- Mjunction Services Limited - India
- IHS Mccloskey Coal Group - USA
- Intertek Mineral Services - Indonesia
- Bank of Tokyo Mitsubishi UFJ Ltd
- Mintek Dendrill Indonesia
- Chettinad Cement Corporation Ltd - India
- Global Coal Blending Company Limited - Australia
- Orica Australia Pty. Ltd.
- European Bulk Services B.V. - Netherlands
- Indika Energy - Indonesia
- GN Power Mariveles Coal Plant, Philippines
- Rashtriya Ispat Nigam Limited - India
- Siam City Cement PLC, Thailand
- Electricity Generating Authority of Thailand
- PTC India Limited - India
- Siam City Cement - Thailand
- LBH Netherlands Bv - Netherlands
- Bukit Makmur.PT - Indonesia
- Electricity Authority, New Zealand
- Cement Manufacturers Association - India
- Therma Luzon, Inc, Philippines
- Parry Sugars Refinery, India
- Ceylon Electricity Board - Sri Lanka
- Bhoruka Overseas - Indonesia
- Independent Power Producers Association of India
- London Commodity Brokers - England
- Central Electricity Authority - India
- Formosa Plastics Group - Taiwan
- Grasim Industreis Ltd - India
- Orica Mining Services - Indonesia
- Jorong Barutama Greston.PT - Indonesia
- Lanco Infratech Ltd - India
- Global Green Power PLC Corporation, Philippines
- Goldman Sachs - Singapore
- PNOC Exploration Corporation - Philippines
- Sree Jayajothi Cements Limited - India
- Timah Investasi Mineral - Indoneisa
- Iligan Light & Power Inc, Philippines
- Tamil Nadu electricity Board
- Gujarat Mineral Development Corp Ltd - India
- Petrochimia International Co. Ltd.- Taiwan
- Chamber of Mines of South Africa
- Kumho Petrochemical, South Korea
- Latin American Coal - Colombia
- Bangladesh Power Developement Board
- Indian Oil Corporation Limited
- Jindal Steel & Power Ltd - India
- Merrill Lynch Commodities Europe
- Aboitiz Power Corporation - Philippines
- Power Finance Corporation Ltd., India
- Africa Commodities Group - South Africa
- Vedanta Resources Plc - India
- Madhucon Powers Ltd - India
- Globalindo Alam Lestari - Indonesia
- Aditya Birla Group - India
- Wilmar Investment Holdings
- Neyveli Lignite Corporation Ltd, - India
- Ministry of Transport, Egypt
- Toyota Tsusho Corporation, Japan
- Planning Commission, India
- Coal and Oil Company - UAE
- CNBM International Corporation - China
- India Bulls Power Limited - India
- OPG Power Generation Pvt Ltd - India
- Standard Chartered Bank - UAE
- Bulk Trading Sa - Switzerland
- Singapore Mercantile Exchange
- International Coal Ventures Pvt Ltd - India
- Price Waterhouse Coopers - Russia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Bukit Baiduri Energy - Indonesia
- Renaissance Capital - South Africa
- Coastal Gujarat Power Limited - India
- Wood Mackenzie - Singapore
- Kapuas Tunggal Persada - Indonesia
- Maheswari Brothers Coal Limited - India
- Banpu Public Company Limited - Thailand
- Bhatia International Limited - India
- Edison Trading Spa - Italy
- Malabar Cements Ltd - India
- Australian Coal Association
- New Zealand Coal & Carbon
- Georgia Ports Authority, United States
- Indogreen Group - Indonesia
- Trasteel International SA, Italy
- Miang Besar Coal Terminal - Indonesia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Vijayanagar Sugar Pvt Ltd - India
- Romanian Commodities Exchange
- Karbindo Abesyapradhi - Indoneisa
- Pipit Mutiara Jaya. PT, Indonesia
- Krishnapatnam Port Company Ltd. - India
- Bahari Cakrawala Sebuku - Indonesia
- Binh Thuan Hamico - Vietnam
- Bukit Asam (Persero) Tbk - Indonesia
- Kohat Cement Company Ltd. - Pakistan
- Directorate General of MIneral and Coal - Indonesia
- South Luzon Thermal Energy Corporation
- Coalindo Energy - Indonesia
- Ministry of Mines - Canada
- Borneo Indobara - Indonesia
- Barasentosa Lestari - Indonesia
- Deloitte Consulting - India
- Simpson Spence & Young - Indonesia
- SMC Global Power, Philippines
- Semirara Mining Corp, Philippines
- Bhushan Steel Limited - India
- Agrawal Coal Company - India
- Bayan Resources Tbk. - Indonesia
- Eastern Energy - Thailand
- TeaM Sual Corporation - Philippines
- Oldendorff Carriers - Singapore
- Anglo American - United Kingdom
- Indian Energy Exchange, India
- Meralco Power Generation, Philippines
- White Energy Company Limited
- PetroVietnam Power Coal Import and Supply Company
- Cigading International Bulk Terminal - Indonesia
- Port Waratah Coal Services - Australia
- Sindya Power Generating Company Private Ltd
- SN Aboitiz Power Inc, Philippines
- Essar Steel Hazira Ltd - India
- Antam Resourcindo - Indonesia
- Directorate Of Revenue Intelligence - India
- Bharathi Cement Corporation - India
- IEA Clean Coal Centre - UK
- Alfred C Toepfer International GmbH - Germany
- Energy Link Ltd, New Zealand
- Baramulti Group, Indonesia
- Kartika Selabumi Mining - Indonesia
- Mercuria Energy - Indonesia
- Ministry of Finance - Indonesia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Parliament of New Zealand
- Sarangani Energy Corporation, Philippines
- Heidelberg Cement - Germany
- Attock Cement Pakistan Limited
- Leighton Contractors Pty Ltd - Australia
- Ind-Barath Power Infra Limited - India
- Kepco SPC Power Corporation, Philippines
- Semirara Mining and Power Corporation, Philippines
- Mercator Lines Limited - India
- Carbofer General Trading SA - India
- Kaltim Prima Coal - Indonesia
- Indo Tambangraya Megah - Indonesia
- MS Steel International - UAE
- Metalloyd Limited - United Kingdom
- Kalimantan Lumbung Energi - Indonesia
- Australian Commodity Traders Exchange
- Kideco Jaya Agung - Indonesia
- Offshore Bulk Terminal Pte Ltd, Singapore
- GMR Energy Limited - India
- Pendopo Energi Batubara - Indonesia
- Makarim & Taira - Indonesia
- Marubeni Corporation - India
- San Jose City I Power Corp, Philippines
- Billiton Holdings Pty Ltd - Australia
- Straits Asia Resources Limited - Singapore
- Commonwealth Bank - Australia
- Salva Resources Pvt Ltd - India
- Gujarat Sidhee Cement - India
- Star Paper Mills Limited - India
- Thiess Contractors Indonesia
- Meenaskhi Energy Private Limited - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Jaiprakash Power Ventures ltd
- Minerals Council of Australia
- Indonesian Coal Mining Association
- McConnell Dowell - Australia
- Sinarmas Energy and Mining - Indonesia
- Rio Tinto Coal - Australia
- Eastern Coal Council - USA
- Xindia Steels Limited - India
- Energy Development Corp, Philippines
- Savvy Resources Ltd - HongKong
- Uttam Galva Steels Limited - India
- PowerSource Philippines DevCo
- Global Business Power Corporation, Philippines
- ASAPP Information Group - India
- Interocean Group of Companies - India
- TNB Fuel Sdn Bhd - Malaysia
- Tata Chemicals Ltd - India
- Kobexindo Tractors - Indoneisa
- The State Trading Corporation of India Ltd
- Gujarat Electricity Regulatory Commission - India
- Petron Corporation, Philippines
- Vizag Seaport Private Limited - India
- Asmin Koalindo Tuhup - Indonesia
- Samtan Co., Ltd - South Korea
- Manunggal Multi Energi - Indonesia
- Central Java Power - Indonesia
- CIMB Investment Bank - Malaysia
- GAC Shipping (India) Pvt Ltd
- Karaikal Port Pvt Ltd - India
- SMG Consultants - Indonesia
- Sakthi Sugars Limited - India
- Medco Energi Mining Internasional
- Larsen & Toubro Limited - India
- Altura Mining Limited, Indonesia
- ICICI Bank Limited - India
- The Treasury - Australian Government
- VISA Power Limited - India
- Sical Logistics Limited - India
- Videocon Industries ltd - India
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