Singapore’s high sulfur bunker fuel sales rose again in November, entrenching the grade’s role in the bunker fuel mix firmly despite the push for cleaner marine fuels amid stricter environmental rules for international shipping.
Sales of HSFO, which includes 180 CST, 380 CST and 500 CST bunker fuel, increased 0.9% from October to a multi-month high of 1.193 million mt in November, and comprised 28.2% of total bunker sales that also include International Maritime Organization-compliant grades, compared with 27.8% in October and 24.8% a year earlier, data from the Maritime and Port Authority of Singapore showed Dec. 13.
HSFO bunker sales surged 18.6% month on month to 1.182 million mt, or 27.8% of total sales, in October.
Industry sources expect the share of HSFO to likely remain elevated going forward.
“HSFO bunker inventories have risen since November to levels balanced against demand, so, the market has seen a more consistent stream of spot inquiries,” a bunker supplier said.
Global bunker demand will surpass 6 million b/d in 2021 and 7 million b/d in 2028, according to S&P Global Platts Analytics.
HSFO will account for 16% of global bunker demand in 2021, according to Platts Analytics, very low sulfur fuel oil 43% and LNG 7%. Platts Analytics forecasts HSFO to account for 25% of global bunker demand in 2030, VLSFO 33% and LNG 16%.
The volume of spot inquiries for HSFO requirements, however, has been “patchy” in December, largely due to cooling freight activity ahead of the festive season, according to traders.
“Lately, the volume of spot inquiries can vary widely daily … In fact, there are more days [in December] when the HSFO market is quiet compared to better days in November,” a Singapore-based bunker supplier said.
Buyers have returned to meet spot requirements, as HSFO bunkers supplies in Singapore have been ample since November. Suppliers were forced to decline spot inquiries in September and October, due to a shortage of cargoes, traders said.
Scrubbers’ installations rise
The rise in installation of scrubbers is supporting HSFO demand, industry sources said, as increasing familiarity with the technology and its benefits in tackling greenhouse gas emissions has diminished the skepticism shrouding its use.
“The scrubber orderbook is more likely to expand than not, especially amid recent shortages of the low sulfur fuel oil alternative which has been firming up delivered premiums,” a Singapore-based trader said.
The scrubber fleet could rise to 7,000 by 2030, Platts Analytics estimates, if clean alternative fuels do not achieve adequate penetration by 2030.
As of end-October, about 5,000 ships were scrubbed out of the nearly 60,000 ships worldwide of above 2,000 dwt, Cem Saral, CEO Cockett Group said at an industry event organized by Platts Dec. 1-2.
“Our estimate with the existing fleet is about somewhere between 47-52 million mt of HSFO demand due to scrubbers, and based on what we see of the global marine fuel market, that’s about somewhere between 17%-22%,” Saral said.
About one-fifth of the global marine fuel market is currently using HSFO, making it a significant part of the overall marine fuel mix, according to Saral. He expects to see a ‘modest’ increase in scrubber uptake despite changes to the differentials between 0.5%S and 3.5%S fuel oil.
“There is still a case for it,” he said.
Singapore is likely to maintain monthly base demand of 900,000 mt to 1 million mt HSFO bunker sales, according to a consensus of bunker suppliers polled by S&P Global Platts, with rising portions of monthly and quarterly term contracts.
The Hi-5 spread in Singapore averaged $116.12/mt through Dec. 15 in 2021, with the fourth quarter outperforming the previous three quarters to average at $141.25/mt as Dec. 15, according to Platts data.
The Hi-5 spread averaged $298.90/mt in January 2020, when the market transitioned to the IMO 2020 mandate.
Source: Platts
