Changes in global Hi5 spreads from 31 December 2022 to date:

• Down from $227/mt in Singapore, to $117/mt
• Down from $256/mt in Fujairah, to $133/mt
• Down from $206/mt in Zhoushan, to $116/mt
• Down from $161/mt in Rotterdam, to $96/mt
• Down from $184/mt in Houston, to $98/mt
• Down from $140/mt in Gibraltar, to $56/mt

Looking at ENGINE data, Singapore’s VLSFO price has come off by a sharp $500/mt in the past year, while its HSFO grade has only seen half that price drop. This has led Singapore’s Hi5 spread to narrow towards a low of just over $100/mt. Scrubber economics have weakened severely after a peak Hi5 spread of well over $500/mt in June 2022.

A similar, albeit less extreme, trend has been observed in other major ports like Rotterdam, Zhoushan, Houston, Fujairah and Gibraltar, where VLSFO prices have plunged to narrow their HSFO-VLSFO spreads. Gibraltar has seen the biggest change compared to other hubs, and the Hi5 spread there stands at just over $50/mt now.

The price of Brent crude has tumbled nearly $12/bbl lower to pull down the entire oil complex, as fears of a global recession has stirred up uncertainties around demand. Severely weakened crude oil prices generally drag those for marine fuels down with them, and the impact is more prominent with VLSFO, which had been trading at considerable premiums to crude. Adding to this, global recession could also hit future shipping demand as maritime trade would slow down in a weak economy.

HSFO has held up better despite lower crude oil levels, as it is already cheaper and has persistent demand for power generation in certain parts of the world.

The VLFSO-HSFO spread is crucial for the marine scrubber market, which saw a steady growth leading up to 2020, and also after the International Maritime Organisation’s (IMO) 0.50% cap came into force.

“The higher the VLSFO premium, the more attractive the investment in a scrubber is because the payback period is shorter,” said BIMCO in a report. “However, the lower-than-expected VLSFO premium has likely discouraged owners from installing scrubbers, particularly on smaller ships with lower bunker consumption and lower savings as a result,” it said.

Source: Engine Technologies