Paris Silence on Shipping & Aviation, Bunker Prices Tumble, Air-to-sea- Freight Gap – Shipping Industry Analysis.

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Shipping

Air-to-Sea Freight Gap – Price Differential at Record High!

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The dramatic decline in ocean freight spot market rates has served to widen the pricing differential to air rates to record levels. With ocean and air taking moving in opposite directions the pricing differential between the two modes has reached a record high.

Emissions – Air vs Sea – Isn’t Sea Transport Fuel Efficient?

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Carbon War Room statement on Paris agreement:

On the outcome of the recent COP 21 negotiations in Paris, Victoria Stulgis, Senior Associate, Carbon War Room commented:

“Despite calls to regulate shipping from the European Parliament, Denmark and the Marshall Islands, as well as multiple industry leaders including Maersk, it is disappointing to learn that shipping has not been included in COP21’s global climate change agreement.”

“Shipping contributes approximately the same amount of CO2 as Germany in terms of global emissions. Yet, while Germany is targeting an 80% emissions reduction by 2050 outside of any commitments arising out of the recent Paris negotiations, the IMO GHG Study 2014 states that shipping is on course to increase emissions by 50-250% by the same year. The latest EU Parliament report predicts that by 2050, shipping will represent 17% of global GHG emissions.”

Bunker prices to continue downward trend:

It is well known that Singapore is the world’s main shipping fuel hub, trading over 40 percent of it globally.  Singapore’s 380-centistoke grade bunker fuel, closed at $183.21 per metric tonne on Tuesday, almost $10 lower from the previous day.

The fall in bunker fuel follows the tumble in crude prices after the Organization of Petroleum Exporting Countries ended their meeting last week without even mentioning production targets, indicating that members will continue to pump near record levels.  OPEC members now seem to be defending market share against one another internally and against competitors like Russia and North America.

Well, let the oil prices drop.  As a fuel user, all we worry about is the fuel quality for a safe and trouble-free running of ships.  For the ports of Rotterdam and major Russian ports – please read about the recent problems being reported by ships.

  1. Port of Rotterdam –  Wax formation in MGO bunker and Purifier heavy sludge formation.
  2. Russian Bunkers – Here are the updates. Update 1 & Update 2

Outcomes of Drop in Bunker Fuel Prices:

  1. The average daily fuel cost to operate a Very Large Crude Carrier (VLCC) has fallen from over $75,000 to under $18,000 currently, meaning a sharp reduction in operating costs for shippers.
  2. Despite this fall in costs, bunker traders said that demand from shippers remained weak as they struggle with a slowdown in global seaborne trade.
  3. China, the world’s biggest exporter, reported a 6.8 percent drop in exports in November from a year earlier, while its imports slowed 8.7 percent, as the country’s economy grows at its slowest pace in decades.
  4. Another trader said that demand would only increase if the average distance of ships’ voyages rose and if ship owners filled their tanks in anticipation of a price rise.  Yet, with the oil supply glut expected to last well into next year and the economic outlook also not improving, this is seen as unlikely.

On the Other End – The Russian Bunker Fuel Saga Continues where ships continue to face machinery problems ranging from main engine fuel pump seizures to complete loss of power or blackout. Bunker prices in the port of St Petersburg dropped to historical lows Tuesday because of increased competition from Rotterdam. Bunker suppliers in St Petersburg face a severe risk of shipowners switching to Rotterdam for bunkering MGO as the prices are profitable low.

Port 380 cSt price in $/MT LSMGO price in $/MT
Singapore 202 389
Rotterdam 162.5 345
St.Petersburg 125 355

Prices are updated based on latest information received! Latest updated on 9th December 2015. The above prices are for reference purpose only.

Click here to know the Latest Bunker fuel prices

Paris silence on aviation and shipping:

The absence of any reference to international aviation and shipping emissions in the Paris Agreement casts doubts over who is responsible for reining in their skyrocketing emissions, green NGOs Seas At Risk, Carbon Market Watch and Transport & Environment have said. While the Agreement endorses a target of 1.5°C, this cannot be achieved unless these two sectors urgently rein in their emissions.

Aviation accounts for about 5% of global warming, and CO2 from shipping is about 3% of the global total. In recent years their emissions have grown twice as fast as the those of the global economy and they could make up 39% of world CO2 emissions in 2050 if left unregulated, according to a scientific study published last month by the European Parliament. If treated as countries, global aviation and shipping would both make the list of top 10 emitters.

Shipping Slowdown:

“China’s demand for coal, iron ore and other commodities has sunk, putting the brakes on ocean shipping” and dealing a blow to Singapore prices, a major shipping company said. Coal imports there for January-September of this year came in 30% below the same-period figure for 2011. Iron ore imports dropped nearly 50%. Freighters have thus made fewer trips to China, causing fuel oil demand to stagnate.”

Oversupply is also a factor. Inventory of heavy oil, including Singapore fuel oil, hit around 30 million barrels at one point in October, the highest in five years.

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For Latest Bunker Fuel Prices – Visit MFAME Fuel Prices

Source: Carbon War room, Drewry Supply Chain, IMO.

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