LSFO premium lowest since March 2022
HSFO premium hits three-month low
Low and high sulfur fuel oil bunker premiums have fallen in Hong Kong, as rising competition from regional ports has weakened domestic demand and dampened the near-term market outlook, bunker suppliers said March 2.
Demand for LSFO bunker is facing pressure from Chinese ports, where prices are competitive against the same grade in Hong Kong and Singapore, a Hong Kong-based fuel oil trader said.
A slower-than-expected recovery in the Chinese economy has resulted in fewer ships calling at the Ningbo-Zhoushan port, capping the overall bunker demand. Competition among bunker supplies in Hong Kong has intensified as the volume of inquiries has thinned, with more players eager to lower offers, local bunker suppliers said.
The Platts Hong Kong-delivered Marine Fuel 0.5%S bunker premium over the benchmark FOB Singapore marine fuel 0.5%S cargo hit an over 11-month low of $31.20/mt March 1, after dropping $6.74/mt on the day, S&P Global Commodity Insights data showed. The LSFO bunker premium was last lower at $29.51/mt March 30, 2022.
“China’s suppliers have access to cheaper resources [and are competitive],” the Hong Kong-based trader said. “The shipping market isn’t doing good as well, with bulker rates and overall charter rates diving south.”
The price trend in Hong Kong generally tracks market fundamentals in Singapore, the world’s largest bunker hub, as upstream suppliers import bunker fuels from the city-state.
The cash differentials for Singapore marine fuel 0.5%S cargoes over the Mean of Platts Singapore marine fuel 0.5%S assessment fell $1.67/mt on the day to a near four-month low of $3.83/mt March 1 due to expectations of higher arbitrage LSFO inflows from the West, according to S&P Global data.
The spread between the Hong Kong-delivered marine fuel 0.5%S and the same delivered grade in Zhoushan widened to an average of $24.65/mt in February, from $18.64/mt in January. Platts last assessed the spread at $20/mt March 1, S&P Global data showed.
Weak demand dents HSFO outlook
A demand lull post the Lunar New Year has extended through February and is likely to continue into early-March, weighing on the HSFO bunker market, traders said.
Higher freight costs and a brief shortage of HSFO supplies during the first half of February had led ex-wharf sellers to offer cargoes at stronger premiums previously that lifted downstream bunker prices, a second Hong Kong-based trader said.
The Platts Hong Kong-delivered bunker premium over the FOB Singapore 380 CST HSFO cargo assessment declined $8.21/mt day on day to an over three-month low of $47.01/mt March 1. The bunker premium was last lower at $44.74/mt Nov. 22, 2022.
Even though some suppliers have capped fuel oil imports in February and January because of slow demand, HSFO inventories are adequate to meet prompt supply in the downstream market, market sources said.
Traders expect a “tougher year” in 2023 than 2022, as congestions ease at regional ports and a bleak economic outlook threatens the overall bunker demand in the near term.
A weaker freight market has also driven buyers to rein in their appetite for bunker fuels, leading them to merely focus on procuring baseline requirements.
Bunker suppliers are observing if this recent behavior of shipowners purchasing only minimum stems is bound to become a norm and whether the phenomenon could prolong throughout 2023, a Singapore-based trader said.
Platts assessed the dirty Singapore-Japan fuel oil 180 CST Aframax freight rates at $26.98/mt March 1, down 34.3% from record highs in late-December, S&P Global data showed.
Source: Platts
