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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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Wednesday, 19 February 20
AS OCEAN TEMPERATURES RISE, SHIPOWNERS LOOK FOR WAYS TO COPE - WARTSILA
The world is heating up, and its oceans are no exception. According to the International Panel on Climate Change (IPCC), the oceans absorb the majo ...
Wednesday, 19 February 20
MARKET INSIGHT - INTERMODAL
The coronavirus outbreak is estimated to negatively affect global economy by at least EUR400bn this year, representing around the 0.4% of global GD ...
Tuesday, 18 February 20
WEEKLY MARKET ANALYSIS - ALLIED
Under such poorly performing market circumstances, many usually take the historical approach, in order to better understand and further analyze the ...
Tuesday, 18 February 20
ADARO SHIPPED 27 PERCENT OF ITS TOTAL COAL PRODUCTION IN 2019 TO INDIA AND CHINA
PT Adaro Energy Tbk (AE) produced 58.03 Mt of coal from PT Adaro Indonesia (AI), Balangan Coal Companies and Adaro Me ...
Tuesday, 18 February 20
ADARO REMAINS POSITIVE ON THE LONG-TERM FUNDAMENTALS OF COAL MARKET SUPPORTED BY THE SOUTHEAST ASIA AND SOUTH ASIA REGION
The global seaborne thermal coal market in 2019 was faced with macro and industry challenges which pushed international coa ...
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- Meenaskhi Energy Private Limited - India
- Bukit Asam (Persero) Tbk - Indonesia
- Sree Jayajothi Cements Limited - India
- Chettinad Cement Corporation Ltd - India
- Ministry of Finance - Indonesia
- Samtan Co., Ltd - South Korea
- Planning Commission, India
- GVK Power & Infra Limited - India
- TNB Fuel Sdn Bhd - Malaysia
- Larsen & Toubro Limited - India
- Iligan Light & Power Inc, Philippines
- The State Trading Corporation of India Ltd
- Goldman Sachs - Singapore
- Kobexindo Tractors - Indoneisa
- Power Finance Corporation Ltd., India
- Jindal Steel & Power Ltd - India
- Baramulti Group, Indonesia
- Sical Logistics Limited - India
- CNBM International Corporation - China
- Orica Australia Pty. Ltd.
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Trasteel International SA, Italy
- Jaiprakash Power Ventures ltd
- Pipit Mutiara Jaya. PT, Indonesia
- Aditya Birla Group - India
- Eastern Energy - Thailand
- Bulk Trading Sa - Switzerland
- Latin American Coal - Colombia
- Maheswari Brothers Coal Limited - India
- Price Waterhouse Coopers - Russia
- Uttam Galva Steels Limited - India
- Coalindo Energy - Indonesia
- Petron Corporation, Philippines
- Wilmar Investment Holdings
- PNOC Exploration Corporation - Philippines
- Coastal Gujarat Power Limited - India
- Neyveli Lignite Corporation Ltd, - India
- Semirara Mining and Power Corporation, Philippines
- Thiess Contractors Indonesia
- Mercator Lines Limited - India
- Vedanta Resources Plc - India
- Krishnapatnam Port Company Ltd. - India
- GAC Shipping (India) Pvt Ltd
- Directorate General of MIneral and Coal - Indonesia
- Directorate Of Revenue Intelligence - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Borneo Indobara - Indonesia
- Ceylon Electricity Board - Sri Lanka
- Gujarat Electricity Regulatory Commission - India
- Parry Sugars Refinery, India
- Makarim & Taira - Indonesia
- Bhushan Steel Limited - India
- London Commodity Brokers - England
- Jorong Barutama Greston.PT - Indonesia
- Minerals Council of Australia
- Tamil Nadu electricity Board
- Gujarat Mineral Development Corp Ltd - India
- Indian Oil Corporation Limited
- Thai Mozambique Logistica
- Binh Thuan Hamico - Vietnam
- IEA Clean Coal Centre - UK
- PetroVietnam Power Coal Import and Supply Company
- Siam City Cement - Thailand
- Medco Energi Mining Internasional
- Port Waratah Coal Services - Australia
- Global Business Power Corporation, Philippines
- PowerSource Philippines DevCo
- Merrill Lynch Commodities Europe
- Leighton Contractors Pty Ltd - Australia
- Bukit Makmur.PT - Indonesia
- Eastern Coal Council - USA
- Australian Coal Association
- Vijayanagar Sugar Pvt Ltd - India
- Pendopo Energi Batubara - Indonesia
- McConnell Dowell - Australia
- Aboitiz Power Corporation - Philippines
- Africa Commodities Group - South Africa
- Madhucon Powers Ltd - India
- Marubeni Corporation - India
- Parliament of New Zealand
- Chamber of Mines of South Africa
- Alfred C Toepfer International GmbH - Germany
- Kumho Petrochemical, South Korea
- Standard Chartered Bank - UAE
- MS Steel International - UAE
- Electricity Authority, New Zealand
- San Jose City I Power Corp, Philippines
- Bangladesh Power Developement Board
- Sindya Power Generating Company Private Ltd
- Ambuja Cements Ltd - India
- SMG Consultants - Indonesia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Bhatia International Limited - India
- Videocon Industries ltd - India
- Central Electricity Authority - India
- Kideco Jaya Agung - Indonesia
- Oldendorff Carriers - Singapore
- Rio Tinto Coal - Australia
- LBH Netherlands Bv - Netherlands
- Grasim Industreis Ltd - India
- Posco Energy - South Korea
- Therma Luzon, Inc, Philippines
- OPG Power Generation Pvt Ltd - India
- Manunggal Multi Energi - Indonesia
- Savvy Resources Ltd - HongKong
- Kepco SPC Power Corporation, Philippines
- South Luzon Thermal Energy Corporation
- Agrawal Coal Company - India
- ICICI Bank Limited - India
- Barasentosa Lestari - Indonesia
- Globalindo Alam Lestari - Indonesia
- Maharashtra Electricity Regulatory Commission - India
- Indo Tambangraya Megah - Indonesia
- CIMB Investment Bank - Malaysia
- Indonesian Coal Mining Association
- Salva Resources Pvt Ltd - India
- Riau Bara Harum - Indonesia
- Mintek Dendrill Indonesia
- Simpson Spence & Young - Indonesia
- Central Java Power - Indonesia
- Siam City Cement PLC, Thailand
- Toyota Tsusho Corporation, Japan
- Tata Chemicals Ltd - India
- Ministry of Transport, Egypt
- Singapore Mercantile Exchange
- Lanco Infratech Ltd - India
- Georgia Ports Authority, United States
- Essar Steel Hazira Ltd - India
- Indogreen Group - Indonesia
- Attock Cement Pakistan Limited
- Billiton Holdings Pty Ltd - Australia
- Edison Trading Spa - Italy
- Petrochimia International Co. Ltd.- Taiwan
- Bukit Baiduri Energy - Indonesia
- Wood Mackenzie - Singapore
- Banpu Public Company Limited - Thailand
- Kalimantan Lumbung Energi - Indonesia
- Dalmia Cement Bharat India
- Electricity Generating Authority of Thailand
- Formosa Plastics Group - Taiwan
- Coal and Oil Company - UAE
- International Coal Ventures Pvt Ltd - India
- SN Aboitiz Power Inc, Philippines
- AsiaOL BioFuels Corp., Philippines
- Semirara Mining Corp, Philippines
- Kohat Cement Company Ltd. - Pakistan
- White Energy Company Limited
- Rashtriya Ispat Nigam Limited - India
- IHS Mccloskey Coal Group - USA
- Asmin Koalindo Tuhup - Indonesia
- Karaikal Port Pvt Ltd - India
- Bayan Resources Tbk. - Indonesia
- Sinarmas Energy and Mining - Indonesia
- Timah Investasi Mineral - Indoneisa
- Offshore Bulk Terminal Pte Ltd, Singapore
- Malabar Cements Ltd - India
- India Bulls Power Limited - India
- TeaM Sual Corporation - Philippines
- Anglo American - United Kingdom
- Bhoruka Overseas - Indonesia
- Xindia Steels Limited - India
- Independent Power Producers Association of India
- Miang Besar Coal Terminal - Indonesia
- Renaissance Capital - South Africa
- Romanian Commodities Exchange
- Sarangani Energy Corporation, Philippines
- PTC India Limited - India
- Sojitz Corporation - Japan
- Mjunction Services Limited - India
- Altura Mining Limited, Indonesia
- Sakthi Sugars Limited - India
- Deloitte Consulting - India
- Straits Asia Resources Limited - Singapore
- Global Coal Blending Company Limited - Australia
- Cement Manufacturers Association - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- Carbofer General Trading SA - India
- Karbindo Abesyapradhi - Indoneisa
- Meralco Power Generation, Philippines
- Energy Link Ltd, New Zealand
- Star Paper Mills Limited - India
- Orica Mining Services - Indonesia
- The University of Queensland
- SMC Global Power, Philippines
- ASAPP Information Group - India
- Indika Energy - Indonesia
- Interocean Group of Companies - India
- Metalloyd Limited - United Kingdom
- VISA Power Limited - India
- New Zealand Coal & Carbon
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Bahari Cakrawala Sebuku - Indonesia
- Kartika Selabumi Mining - Indonesia
- The Treasury - Australian Government
- Bharathi Cement Corporation - India
- GMR Energy Limited - India
- Vizag Seaport Private Limited - India
- Energy Development Corp, Philippines
- Gujarat Sidhee Cement - India
- Cigading International Bulk Terminal - Indonesia
- Kapuas Tunggal Persada - Indonesia
- Economic Council, Georgia
- Indian Energy Exchange, India
- European Bulk Services B.V. - Netherlands
- Australian Commodity Traders Exchange
- Antam Resourcindo - Indonesia
- Holcim Trading Pte Ltd - Singapore
- GN Power Mariveles Coal Plant, Philippines
- Commonwealth Bank - Australia
- Global Green Power PLC Corporation, Philippines
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Ind-Barath Power Infra Limited - India
- Kaltim Prima Coal - Indonesia
- Heidelberg Cement - Germany
- Ministry of Mines - Canada
- Intertek Mineral Services - Indonesia
- Mercuria Energy - Indonesia
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