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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, 20 February 20
CHINA RESUMES OVER 70 PCT COAL PRODUCTION CAPACITY AMID EPIDEMIC - XINHUA
China has resumed 70.2 percent of its coal production capacity with output recovering steadily amid the fight against the novel coronavirus epidemi ...
Thursday, 20 February 20
CHINA THERMAL COAL MARKET FACES 2-3 MONTH CORONAVIRUS SHORT SQUEEZE: NOBLE - REUTERS
China’s domestic thermal coal market faces a 2-3 month short squeeze as a rapidly spreading coronavirus outbreak curtails production more tha ...
Wednesday, 19 February 20
KOREA MIDLAND POWER INVITED BIDS FOR 1 MILLION TONS OF HCV AND LCV COAL FOR Q2- Q4 LOADING
COALspot.com: Korea Midland Power Co. Ltd, (KOMIPO). has issued an international tender for total 1 million MT of coal for April to December 2020 l ...
Wednesday, 19 February 20
GLENCORE WRITES OFF ALMOST $1 BILLION AT COLOMBIAN COAL MINES DUE TO FALLING EUROPEAN IMPORTS: BLOOMBERG
The economic case against European coal is proving too much for even Glencore Plc.
The world’s biggest coal shipper cut the va ...
Wednesday, 19 February 20
MINERS WELCOME INDONESIA'S NEW JOBS BILL THAT COULD SPUR COAL GROWTH - REUTERS
Miners have welcomed proposed changes to Indonesian mining rules under a new law aimed at boosting investment, though critics are concerned that th ...
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- Vijayanagar Sugar Pvt Ltd - India
- Bahari Cakrawala Sebuku - Indonesia
- Agrawal Coal Company - India
- Mintek Dendrill Indonesia
- CNBM International Corporation - China
- Coastal Gujarat Power Limited - India
- Minerals Council of Australia
- Central Electricity Authority - India
- International Coal Ventures Pvt Ltd - India
- Meralco Power Generation, Philippines
- PTC India Limited - India
- Ceylon Electricity Board - Sri Lanka
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Altura Mining Limited, Indonesia
- Attock Cement Pakistan Limited
- Pendopo Energi Batubara - Indonesia
- Jorong Barutama Greston.PT - Indonesia
- Energy Link Ltd, New Zealand
- Mercator Lines Limited - India
- Antam Resourcindo - Indonesia
- Deloitte Consulting - India
- PNOC Exploration Corporation - Philippines
- Bhushan Steel Limited - India
- Aditya Birla Group - India
- Kumho Petrochemical, South Korea
- Karbindo Abesyapradhi - Indoneisa
- Star Paper Mills Limited - India
- Chettinad Cement Corporation Ltd - India
- Bayan Resources Tbk. - Indonesia
- White Energy Company Limited
- Tata Chemicals Ltd - India
- Interocean Group of Companies - India
- Renaissance Capital - South Africa
- Anglo American - United Kingdom
- Maheswari Brothers Coal Limited - India
- Power Finance Corporation Ltd., India
- Trasteel International SA, Italy
- South Luzon Thermal Energy Corporation
- Dalmia Cement Bharat India
- Kobexindo Tractors - Indoneisa
- Salva Resources Pvt Ltd - India
- Electricity Generating Authority of Thailand
- Planning Commission, India
- Carbofer General Trading SA - India
- Neyveli Lignite Corporation Ltd, - India
- Bukit Asam (Persero) Tbk - Indonesia
- Leighton Contractors Pty Ltd - Australia
- Essar Steel Hazira Ltd - India
- Goldman Sachs - Singapore
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Standard Chartered Bank - UAE
- Ind-Barath Power Infra Limited - India
- Aboitiz Power Corporation - Philippines
- Holcim Trading Pte Ltd - Singapore
- Madhucon Powers Ltd - India
- London Commodity Brokers - England
- McConnell Dowell - Australia
- IHS Mccloskey Coal Group - USA
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Ministry of Finance - Indonesia
- Kepco SPC Power Corporation, Philippines
- Vizag Seaport Private Limited - India
- Gujarat Sidhee Cement - India
- Malabar Cements Ltd - India
- Karaikal Port Pvt Ltd - India
- Kideco Jaya Agung - Indonesia
- SMC Global Power, Philippines
- Gujarat Electricity Regulatory Commission - India
- PetroVietnam Power Coal Import and Supply Company
- Bangladesh Power Developement Board
- Grasim Industreis Ltd - India
- Indo Tambangraya Megah - Indonesia
- Posco Energy - South Korea
- Sojitz Corporation - Japan
- Parliament of New Zealand
- Marubeni Corporation - India
- Coal and Oil Company - UAE
- Bhatia International Limited - India
- Energy Development Corp, Philippines
- Jindal Steel & Power Ltd - India
- Videocon Industries ltd - India
- Petron Corporation, Philippines
- GVK Power & Infra Limited - India
- Wood Mackenzie - Singapore
- Vedanta Resources Plc - India
- Formosa Plastics Group - Taiwan
- Global Coal Blending Company Limited - Australia
- Electricity Authority, New Zealand
- Krishnapatnam Port Company Ltd. - India
- Ministry of Mines - Canada
- TeaM Sual Corporation - Philippines
- India Bulls Power Limited - India
- Bharathi Cement Corporation - India
- Semirara Mining and Power Corporation, Philippines
- Indogreen Group - Indonesia
- Romanian Commodities Exchange
- IEA Clean Coal Centre - UK
- Bhoruka Overseas - Indonesia
- Timah Investasi Mineral - Indoneisa
- Wilmar Investment Holdings
- Port Waratah Coal Services - Australia
- GN Power Mariveles Coal Plant, Philippines
- Globalindo Alam Lestari - Indonesia
- OPG Power Generation Pvt Ltd - India
- Bulk Trading Sa - Switzerland
- Australian Commodity Traders Exchange
- GMR Energy Limited - India
- Iligan Light & Power Inc, Philippines
- SMG Consultants - Indonesia
- Cement Manufacturers Association - India
- Africa Commodities Group - South Africa
- Uttam Galva Steels Limited - India
- Intertek Mineral Services - Indonesia
- Mjunction Services Limited - India
- Cigading International Bulk Terminal - Indonesia
- Meenaskhi Energy Private Limited - India
- Heidelberg Cement - Germany
- Sical Logistics Limited - India
- Petrochimia International Co. Ltd.- Taiwan
- Economic Council, Georgia
- Offshore Bulk Terminal Pte Ltd, Singapore
- Semirara Mining Corp, Philippines
- Global Green Power PLC Corporation, Philippines
- Savvy Resources Ltd - HongKong
- Coalindo Energy - Indonesia
- Merrill Lynch Commodities Europe
- Oldendorff Carriers - Singapore
- TNB Fuel Sdn Bhd - Malaysia
- Tamil Nadu electricity Board
- Mercuria Energy - Indonesia
- Larsen & Toubro Limited - India
- European Bulk Services B.V. - Netherlands
- Sarangani Energy Corporation, Philippines
- Central Java Power - Indonesia
- Singapore Mercantile Exchange
- New Zealand Coal & Carbon
- LBH Netherlands Bv - Netherlands
- Orica Australia Pty. Ltd.
- Pipit Mutiara Jaya. PT, Indonesia
- MS Steel International - UAE
- Directorate General of MIneral and Coal - Indonesia
- The State Trading Corporation of India Ltd
- Indika Energy - Indonesia
- The University of Queensland
- Toyota Tsusho Corporation, Japan
- Ministry of Transport, Egypt
- Maharashtra Electricity Regulatory Commission - India
- Parry Sugars Refinery, India
- Riau Bara Harum - Indonesia
- Directorate Of Revenue Intelligence - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- VISA Power Limited - India
- Bukit Makmur.PT - Indonesia
- Jaiprakash Power Ventures ltd
- Indian Energy Exchange, India
- Samtan Co., Ltd - South Korea
- Barasentosa Lestari - Indonesia
- Thai Mozambique Logistica
- GAC Shipping (India) Pvt Ltd
- Sree Jayajothi Cements Limited - India
- Kartika Selabumi Mining - Indonesia
- Eastern Energy - Thailand
- Ambuja Cements Ltd - India
- Edison Trading Spa - Italy
- Kohat Cement Company Ltd. - Pakistan
- Bank of Tokyo Mitsubishi UFJ Ltd
- Sinarmas Energy and Mining - Indonesia
- Lanco Infratech Ltd - India
- Kapuas Tunggal Persada - Indonesia
- Banpu Public Company Limited - Thailand
- PowerSource Philippines DevCo
- Kalimantan Lumbung Energi - Indonesia
- Sakthi Sugars Limited - India
- Indonesian Coal Mining Association
- Sindya Power Generating Company Private Ltd
- Rio Tinto Coal - Australia
- Borneo Indobara - Indonesia
- Binh Thuan Hamico - Vietnam
- Kaltim Prima Coal - Indonesia
- SN Aboitiz Power Inc, Philippines
- Siam City Cement - Thailand
- Baramulti Group, Indonesia
- Manunggal Multi Energi - Indonesia
- Gujarat Mineral Development Corp Ltd - India
- Thiess Contractors Indonesia
- Rashtriya Ispat Nigam Limited - India
- Chamber of Mines of South Africa
- Price Waterhouse Coopers - Russia
- Commonwealth Bank - Australia
- Global Business Power Corporation, Philippines
- Straits Asia Resources Limited - Singapore
- The Treasury - Australian Government
- Orica Mining Services - Indonesia
- Independent Power Producers Association of India
- Georgia Ports Authority, United States
- Latin American Coal - Colombia
- Therma Luzon, Inc, Philippines
- San Jose City I Power Corp, Philippines
- Eastern Coal Council - USA
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Makarim & Taira - Indonesia
- Medco Energi Mining Internasional
- Asmin Koalindo Tuhup - Indonesia
- Metalloyd Limited - United Kingdom
- ASAPP Information Group - India
- Australian Coal Association
- Siam City Cement PLC, Thailand
- Simpson Spence & Young - Indonesia
- Xindia Steels Limited - India
- Indian Oil Corporation Limited
- Alfred C Toepfer International GmbH - Germany
- Billiton Holdings Pty Ltd - Australia
- ICICI Bank Limited - India
- Miang Besar Coal Terminal - Indonesia
- AsiaOL BioFuels Corp., Philippines
- Bukit Baiduri Energy - Indonesia
- CIMB Investment Bank - Malaysia
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