Japan has emerged as the most cost-effective location for purchasing low-sulfur fuel oil (LSFO) this year. However, with a subdued shipping market and weak demand outlook for December, the future of this trend remains uncertain, reports S&P Global.
Competitive Location
Platts, part of S&P Global Commodity Insights, assessed the Japan-delivered LSFO flat price at $569/mt on Nov. 27, on par with Hong Kong and cheaper than Zhoushan at $574/mt and South Korea at $580.25/mt.
Japan LSFO prices then eased 1.1% to $563/mt on Nov. 28, making it the most competitive bunkering location among major North Asian peers in nearly 12 months, and have since held in a tight band of $563-$565/mt.
Meanwhile, prices in Hong Kong, Zhoushan, and South Korea have edged up to a range in the $570s-$590s/mt, supported by some tightness in supply in the respective markets.
This is the time Japan has been the most competitive regional location for LSFO since Nov. 27-Dec. 1, 2023, when Japanese LSFO ranged between $641-$662/mt compared to a $650-$677.50/mt range for the other three locations.
Competition Intensifies
The plunge in Japanese prices has come amid a lean November which saw offer and deal levels eroding amid limited inquiries in the market, while at the same tim,e the conventionally more competitive ports of Hong Kong and Zhoushan saw demand strengthening after an initially slow first half of the month.
“[Japan bunker] demand [is] not good, some [are] too competitive as many want to move volumes. The [market is] quite messy as everyone wants to fulfill their [sales] quotas,” a local bunker trader said.
“I am kind of off the spot market as I don’t need to sell at such levels,” the trader added.
Market sources are bracing for a sluggish fourth quarter overall, with one trader estimating that sales so far this quarter are down by about 10-15% compared with last year.
While not all were as downbeat about demand, some noted little upside for the period against expectations of the year-end as a seasonally good quarter.
“Demand in Q4 has been better than Q3 so far, but the supply is very ample as [there hasn’t been refinery] troubles [affecting] production,” the first trader added.
As with Japan, other regional peers also saw a weaker November but appear to be entering December with slightly tighter supply factors lending premiums more support.
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Source: S&P Global
