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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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- Savvy Resources Ltd - HongKong
- Meralco Power Generation, Philippines
- Coal and Oil Company - UAE
- Marubeni Corporation - India
- Planning Commission, India
- Maheswari Brothers Coal Limited - India
- Bulk Trading Sa - Switzerland
- Interocean Group of Companies - India
- Chettinad Cement Corporation Ltd - India
- MS Steel International - UAE
- Medco Energi Mining Internasional
- Georgia Ports Authority, United States
- Jaiprakash Power Ventures ltd
- Lanco Infratech Ltd - India
- International Coal Ventures Pvt Ltd - India
- Simpson Spence & Young - Indonesia
- Goldman Sachs - Singapore
- Sarangani Energy Corporation, Philippines
- Rio Tinto Coal - Australia
- Romanian Commodities Exchange
- Borneo Indobara - Indonesia
- Timah Investasi Mineral - Indoneisa
- PTC India Limited - India
- Altura Mining Limited, Indonesia
- Toyota Tsusho Corporation, Japan
- PetroVietnam Power Coal Import and Supply Company
- Meenaskhi Energy Private Limited - India
- Indian Oil Corporation Limited
- Sical Logistics Limited - India
- Uttam Galva Steels Limited - India
- Semirara Mining Corp, Philippines
- Makarim & Taira - Indonesia
- Mercuria Energy - Indonesia
- Mintek Dendrill Indonesia
- The State Trading Corporation of India Ltd
- Asmin Koalindo Tuhup - Indonesia
- Global Coal Blending Company Limited - Australia
- Larsen & Toubro Limited - India
- Trasteel International SA, Italy
- Manunggal Multi Energi - Indonesia
- Australian Commodity Traders Exchange
- McConnell Dowell - Australia
- ASAPP Information Group - India
- Vizag Seaport Private Limited - India
- Siam City Cement - Thailand
- Parry Sugars Refinery, India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Anglo American - United Kingdom
- Edison Trading Spa - Italy
- Bank of Tokyo Mitsubishi UFJ Ltd
- Bhoruka Overseas - Indonesia
- PNOC Exploration Corporation - Philippines
- Indogreen Group - Indonesia
- ICICI Bank Limited - India
- Directorate Of Revenue Intelligence - India
- Bahari Cakrawala Sebuku - Indonesia
- Billiton Holdings Pty Ltd - Australia
- Kepco SPC Power Corporation, Philippines
- Africa Commodities Group - South Africa
- Barasentosa Lestari - Indonesia
- Essar Steel Hazira Ltd - India
- Electricity Authority, New Zealand
- TeaM Sual Corporation - Philippines
- Maharashtra Electricity Regulatory Commission - India
- Pipit Mutiara Jaya. PT, Indonesia
- Indonesian Coal Mining Association
- Salva Resources Pvt Ltd - India
- CIMB Investment Bank - Malaysia
- Orica Mining Services - Indonesia
- Global Green Power PLC Corporation, Philippines
- Riau Bara Harum - Indonesia
- Cement Manufacturers Association - India
- Central Electricity Authority - India
- Karbindo Abesyapradhi - Indoneisa
- Semirara Mining and Power Corporation, Philippines
- Therma Luzon, Inc, Philippines
- Kohat Cement Company Ltd. - Pakistan
- Posco Energy - South Korea
- Parliament of New Zealand
- Minerals Council of Australia
- Coalindo Energy - Indonesia
- Holcim Trading Pte Ltd - Singapore
- Merrill Lynch Commodities Europe
- Xindia Steels Limited - India
- Ambuja Cements Ltd - India
- Kaltim Prima Coal - Indonesia
- European Bulk Services B.V. - Netherlands
- Chamber of Mines of South Africa
- Bukit Asam (Persero) Tbk - Indonesia
- Bhatia International Limited - India
- Petron Corporation, Philippines
- Wilmar Investment Holdings
- Neyveli Lignite Corporation Ltd, - India
- Madhucon Powers Ltd - India
- Tata Chemicals Ltd - India
- IEA Clean Coal Centre - UK
- Miang Besar Coal Terminal - Indonesia
- Mercator Lines Limited - India
- Eastern Coal Council - USA
- Bukit Baiduri Energy - Indonesia
- Leighton Contractors Pty Ltd - Australia
- Independent Power Producers Association of India
- Rashtriya Ispat Nigam Limited - India
- South Luzon Thermal Energy Corporation
- Star Paper Mills Limited - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Energy Link Ltd, New Zealand
- Sojitz Corporation - Japan
- GAC Shipping (India) Pvt Ltd
- Kobexindo Tractors - Indoneisa
- Globalindo Alam Lestari - Indonesia
- PowerSource Philippines DevCo
- Metalloyd Limited - United Kingdom
- Gujarat Sidhee Cement - India
- San Jose City I Power Corp, Philippines
- Attock Cement Pakistan Limited
- New Zealand Coal & Carbon
- GMR Energy Limited - India
- Sree Jayajothi Cements Limited - India
- Sindya Power Generating Company Private Ltd
- Singapore Mercantile Exchange
- London Commodity Brokers - England
- Directorate General of MIneral and Coal - Indonesia
- Offshore Bulk Terminal Pte Ltd, Singapore
- Electricity Generating Authority of Thailand
- Commonwealth Bank - Australia
- OPG Power Generation Pvt Ltd - India
- Bangladesh Power Developement Board
- Standard Chartered Bank - UAE
- LBH Netherlands Bv - Netherlands
- Vijayanagar Sugar Pvt Ltd - India
- Deloitte Consulting - India
- The Treasury - Australian Government
- Iligan Light & Power Inc, Philippines
- Straits Asia Resources Limited - Singapore
- Bharathi Cement Corporation - India
- Samtan Co., Ltd - South Korea
- Alfred C Toepfer International GmbH - Germany
- Bukit Makmur.PT - Indonesia
- Price Waterhouse Coopers - Russia
- Oldendorff Carriers - Singapore
- Agrawal Coal Company - India
- Ministry of Mines - Canada
- Karaikal Port Pvt Ltd - India
- Malabar Cements Ltd - India
- Dalmia Cement Bharat India
- Petrochimia International Co. Ltd.- Taiwan
- Jindal Steel & Power Ltd - India
- Port Waratah Coal Services - Australia
- Cigading International Bulk Terminal - Indonesia
- Kalimantan Lumbung Energi - Indonesia
- Gujarat Mineral Development Corp Ltd - India
- Kartika Selabumi Mining - Indonesia
- GN Power Mariveles Coal Plant, Philippines
- Eastern Energy - Thailand
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- CNBM International Corporation - China
- Thai Mozambique Logistica
- SMC Global Power, Philippines
- Antam Resourcindo - Indonesia
- Ind-Barath Power Infra Limited - India
- Jorong Barutama Greston.PT - Indonesia
- AsiaOL BioFuels Corp., Philippines
- VISA Power Limited - India
- Sakthi Sugars Limited - India
- TNB Fuel Sdn Bhd - Malaysia
- Binh Thuan Hamico - Vietnam
- Ministry of Transport, Egypt
- SN Aboitiz Power Inc, Philippines
- Latin American Coal - Colombia
- Carbofer General Trading SA - India
- Kumho Petrochemical, South Korea
- Banpu Public Company Limited - Thailand
- Central Java Power - Indonesia
- Gujarat Electricity Regulatory Commission - India
- Baramulti Group, Indonesia
- Tamil Nadu electricity Board
- Renaissance Capital - South Africa
- Formosa Plastics Group - Taiwan
- Vedanta Resources Plc - India
- Videocon Industries ltd - India
- India Bulls Power Limited - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Indo Tambangraya Megah - Indonesia
- Mjunction Services Limited - India
- Ceylon Electricity Board - Sri Lanka
- Intertek Mineral Services - Indonesia
- Aditya Birla Group - India
- Ministry of Finance - Indonesia
- Thiess Contractors Indonesia
- Orica Australia Pty. Ltd.
- Global Business Power Corporation, Philippines
- Energy Development Corp, Philippines
- Pendopo Energi Batubara - Indonesia
- SMG Consultants - Indonesia
- Bhushan Steel Limited - India
- Kideco Jaya Agung - Indonesia
- Bayan Resources Tbk. - Indonesia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Economic Council, Georgia
- Heidelberg Cement - Germany
- White Energy Company Limited
- Wood Mackenzie - Singapore
- IHS Mccloskey Coal Group - USA
- Aboitiz Power Corporation - Philippines
- Krishnapatnam Port Company Ltd. - India
- Indika Energy - Indonesia
- Kapuas Tunggal Persada - Indonesia
- Indian Energy Exchange, India
- GVK Power & Infra Limited - India
- Sinarmas Energy and Mining - Indonesia
- Siam City Cement PLC, Thailand
- Grasim Industreis Ltd - India
- Power Finance Corporation Ltd., India
- The University of Queensland
- Australian Coal Association
- Coastal Gujarat Power Limited - India
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