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