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