HSFO demand should start to increase globally, says BIMCO
London (Quantum Commodity Intelligence) - The decline in high sulfur fuel oil's share of the global bunker market has stopped and should start to increase amid a healthy discount to marine fuel (0.5% sulfur) fuel, according to BIMCO, the industry trade body.
Shippers can currently lock in forward purchases of high sulfur fuel oil in Rotterdam $124.25/mt cheaper than marine fuel (0.5%) in 2022, and $122.25/mt cheaper in 2023, according to broker data.
The difference between the two fuels was $104/mt for spot-loading barges at yesterday's 16.30 London close, with swaps for the remainder of the second quarter pricing at an average difference of $99.25/mt, according to Quantum data.
This difference rises steadily through the following quarters at $106.33/mt, $117.75/mt and then $121.92/mt in Q1 2022.
"After the quick adjustment to the global sulfur cap, the decline in HSFO's share of total bunker sales has stopped," BIMCO's chief shipping analyst Peter Sand said in a report April 29.
"Although its share is much lower than any time prior to Q4 2019, the steady rise in scrubber-fitted ships has supported demand for HSFO and will remain until new solutions and future fuels are widely introduced on the industry's path to decarbonization," he added.
New regulations were introduced by the International Maritime Authority in 2020, which mandated ships used 5,000 ppm sulfur bunker fuel unless scrubbing technology was used to remove the pollution.
Analyst group Drewry has estimated the cost of fitting an open loop scrubber in a new build very large crude carrier would be between $2.5 and $3 million.
The cost of retrofitting a scrubber on an existing VLCC would be $4 to $4.5 million.
With a spread of $87/mt between HSFO and marine fuel (0.5%), the saving on bunker costs for a new build VLCC would be $1.6 million a year.
BIMCO estimates there are currently 4,006 scrubber-fitted ships, up from 2,010 in January 2020.
The crude oil tanker fleet has the highest share at 30.5% of total capacity, and the oil product tanker fleet the lowest at 13.8%.
