Shipping regulation and the EU Emission Trading Scheme

Spot marine fuel markets in the Americas would likely see rangebound pricing due to relatively unchanged weak demand fundamentals, with the US crude complex providing direction.

Latin America

Latin America bunker markets enter the week in a scenario of supply constraints at a couple of ports and weak demand in others, amid rising global oil prices.

Pricing changes from June 7 to June 11 in 0.5%S marine fuel were more subdued in the region compared with previous weeks, with the fuel increasing $8, or 1.5%, at $544/mt ex-wharf in Balboa, Panama. Sources said the market was active but not as much as in previous weeks.

In Callao, demand was strong during the week, rising $7, or 1.1%, at $625/mt. A market source said the Peruvian port keeps benefiting from diminished supply in neighboring Ecuador.

The 0.5%S fuel in Guayaquil also rose $7, or 1.1%, at $617/mt, with sources talking of both “dry” supply and low demand.

While social protests and blockades have continued for more than a month and half in Colombia, suppliers have managed to continue supplying in a framework of low demand.

“Protests are still causing difficulties, but vehicles have been moving. Activity is more or less regular,” a market participant said.

“We are trying to meet the demand we can commit to,” another participant said. “In general, the market is showing distrust due to the civil situation,” the source added.

In Valparaiso, prices recovered from a retreat in early June though ended assessed at $688/mt June 11 — unmoved from June 7. “The market has been slow today, but it is much more active compared to previous months,” a bunker source said.

The 0.5%S only fell in Argentina, $3, or 0.5%, at $566/mt in a liquid market with strong competition. Marine gasoil experienced a strong jump of $29, or 4.3%, at $707/mt as market sources talked about a lack of supplies from one big supplier.

Refinery prices influenced an $18 increase, or 2.8%, in Colombia at $672/mt.

Pricing in the region will gather support from crude futures, which were climbing June 14 on bullish demand outlooks after advancing 0.7% at $72.79/b the week prior. Wholesale 0.5% marine fuel rose 0.6% at $517.75/mt.

North America East, West coasts

On the East Coast, spot 0.5%S marine fuel retail pricing inched lower June 7-11, reflecting lower supplier offers tied to weak demand fundamentals that were mitigated by a stronger UC crude complex.

Spot 0.5%S assessments shed $2 June 7-11 in each port, with New York closing the period at $522/mt ex-wharf and Philadelphia maintaining its $7 spread at $529/mt ex-wharf.

“Seeing super low demand in New York this week for some reason,” a local source said.

Marine gasoil spot values followed the overall bearish trend, with New York and Philadelphia dipping $1 each at $615/mt ex-wharf and $621/mt ex-wharf, respectively.

Montreal spot MGO pricing showed a divergence from the trend, rising $6 during the period on higher supplier offers talked in a wide range.

A local source cited congestion in the Montreal market to end the week, adding that prompt delivery options were not in play before June 14-15.

On the West Coast, spot values mostly inched up for the period of June 7-11 on support from firmer Asian segments and a stronger US crude complex, with weak demand limiting liquidity and mitigating gains overall.

The Vancouver spot 0.5%S assessment rose $2 for the week to last be assessed at $573/mt ex-wharf while Los Angeles was flat at $553/mt delivered.

MGO markets showed a more pronounced strength, with Vancouver prices rising $7 over the period to close the week at $709/mt ex-wharf.

“[Northwest] diesel racks moving faster than Singapore 10 ppm [gasoil],” a supplier said of higher Vancouver levels, adding that it was seeing “absolutely no demand.”

The spread between 0.5%S and MGO in Vancouver was “growing” due to these factors, the source added.

US Gulf Coast

US Gulf Coast bunker prices were mostly steady during the week June 7-11, with the biggest gain being $4/mt in IFO 380 CST prices in Houston and New Orleans and the biggest decline being $1/mt in New Orleans MGO.

Sources reported an oversupplied market that has yet to see much of an increase in demand, which could help the two-tiered pricing structure persist in Houston VLSFO based on stem sizes.

A source also said barges in Houston would be congested into the coming week, helping smaller suppliers “cherry-pick” deals to fix at high prices that are not done by big suppliers with inhouse barging.

Asia Pacific Shipping Forum happening on July 14

Shipping has faced challenge after challenge in recent history, from IMO2020 regulations, the blockage of the Suez Canal, congestion, constrained supply chains and the impending environmental regulations such as Energy Efficiency Existing Ship Index (EEXI) and Carbon Intensity Indicator (CII).

For the near future can we expect radical change? Will the market continue to be under extreme pressure? How will demand centers influence rates?

But the most important question remains: will shipping markets buoy or sink?

Join S&P Global Platts Asia Pacific Shipping Forum to learn why shipping always takes the center stage in commodities markets.

This thought-leadership forum will address container, tanker, and dry-bulk markets with specialized critical content. Furthermore, we will explore bunker pricing outlooks and scrubber economics. The Forum will conclude with a vital panel discussion on the challenges shipping may face due to energy transition.

For a holistic look at shipping markets, the Forum is a must attend event!

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Where the fuel markets meet

The bunker industry is under increased pressure to address environmental impacts and reduce emissions across its value chain. The IMO Initial GHG Strategy mandates that shipping’s GHG emissions be reduced to at least 50% below 2008 levels by 2050.

This timely annual event will take an in-depth look at pricing trends and impacts from the IMO 2020 sulphur cap, access to capital while recovering from a global pandemic, and the decarbonization of the world of shipping and bunkering. We will discuss current viable solutions and the prospects of zero-carbon alternatives.

The decarbonization of the bunker industry offers unique commercial and industrial infrastructure opportunities, including developing and emerging economies.

Topics of discussion will include:

The viability of zero-carbon bunker fuels for decarbonizing the industry
– There is uncertainty around which of the emerging new bunker fuels will be the most significant in decarbonizing the industry. What are the alternative fuels coming into the mix? What role will LNG play in the bunker fuel transition? What is the commercial viability of ammonia, green methanol, and hydrogen as future bunker fuels?

Looking ahead at bunker fuel investment and value-chain transformation
– A panel of experts will examine how the market can drive investment in zero-carbon fuel options. What is the commercial and regulatory future of bunker fuels? What are the opportunities, risks, and challenges ahead? What is the current landscape for financing compliant fuels vs. new fuels entering the market? Is there enough bunker credit and capital access to drive transformation?

S&P Global Platts Bunker Fuel Market Update
– S&P Global Platts specialists will examine the main market challenges today. We will cover key pricing trends in the bunker fuels buying market, supply and demand dynamics impacting the value chain, and the resilience of North and Latin American bunker markets.

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BP Marine continues to build its strategic footprint in Australia and New Zealand despite the impact from the coronavirus pandemic, Anthony Tolani, General Manager BP Marine ANZ, told S&P Global Platts on June 11.

This comes as some industry sources said that BP’s recent move to strengthen its presence in the New Zealand market, after it inked an agreement with the Ports of Auckland, was most likely a way to mitigate the impact from Australia’s falling bunker volumes as cruise tourism has been badly hit.

Australia, ranking among those with the highest penetration of any cruise market globally outside the US, has seen its bunker fuel consumption plummet due to restrictions on entry and sailings of cruise ships, pressuring the country’s refiners further as they also grapple with demand constraints for other oil products due to the global coronavirus pandemic.

“COVID-19 has had a huge impact on demand in the region…The largest impact has been on the cruise industry, which was banned across various countries and is yet to be lifted in ANZ,” Tolani said.

“However, BP Marine manages the complete end-to-end supply chain in this region and we see the ANZ region as a whole, in the same way our customers do,” he added.

VLSFO sales have dropped between 30% and 50% as cruises were forced to cease operations there from March last year to curb the spread of the pandemic, market sources told Platts separately.

The demand for HSFO bunker fuel has also “evaporated” after cruise ships fitted with scrubbers suspended operations, an Australia-based bunker trader said.

Auckland port secures VLSFO

In late May, Ports of Auckland said that its subsidiary Seafuels and BP had reached an agreement to use the bunker barge ‘Awanuia’ to deliver MARPOL-compliant VLSFO and marine gasoil to the marine market in the Auckland port.

This agreement will help ensure New Zealand is able to meet its international obligations under Annex VI of the MARPOL convention for the Prevention of Pollution from Ships, by providing international and domestic vessels calling New Zealand with MARPOL compliant fuels, it said.

New Zealand joined MARPOL in 1998 and is due to sign up to Annex VI from late 2021.

The Port of Long Beach, California, set a record in May for the largest container volume handled in a single month, topping 900,000 twenty-foot equivalent units (TEUs) for the first time, the port said June 9.

Total throughput at the second-busiest container port in North America was 907,216 TEUs in May, up by 44% from the same month last year and a significant gain from the previous monthly record of 840,387 TEUs in March.

“We are seeing a demand for more goods as the country continues to open up and people return to work,” said Mario Cordero, executive director of the Port of Long Beach.

The surge in US spending on consumer goods has continued to drive demand for imports, while vaccinations of port workers has increased the workforce available to process cargoes waiting on ships at anchor in the San Pedro Bay.

Loaded import volumes in May also hit an all-time high of 444,736 TEUs, up 42% year on year, while loaded export volumes only increased by 0.6% over the same period to 135,345 TEUs.

But US import volumes could begin to slow from June onwards as the COVID-19 outbreak centered on the Yantian container terminal in South China has severely curtailed operations at one of the country’s top export terminals, creating a rapidly growing pile-up of export cargoes that may not be processed by other ports.

Maersk, MSC and Hapag-Lloyd are among the shipping lines that have announced they will skip calls on Yantian terminal in the coming weeks in order to maintain schedule reliability. There were 26 ships waiting at anchor near Shenzhen’s Yantian terminal on June 9, including three ultra-large ships with greater than 18,000-TEU carrying capacity, according to cFlow, S&P Global Platts’ trade flow software.

Platts Container Rate 13 — North Asia to West Coast North America — was assessed at an all-time high of $5,500/FEU on June 9, up by 168% from the year-ago date.