Japan Surprises with 10.7% Rise in Bonded Bunker Fuel Sales in May

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Japan’s May Bonded Bunker Fuel Sales Rise 10.7% from April to 2.35 mil Barrels

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According to data from the Ministry of Economy, Trade and Industry website, Japan sold 2.348 million barrels of bonded bunker fuel in May, up 10.7% from April and up 65.6% year on year.

The 10.7% month-on-month increase in May sales surprised many Japanese bunker fuel traders and said that May was probably the worst performing month for bunker sales so far in 2016, due to a combination of perceived lacklustre demand and the long Golden Week holidays, which reduced the number of days available in the month for traders to sell bunker fuel.

“Honestly, I had also thought May would be worse than April,” a Japan-based trader said.

“But one possibility could be that METI included domestic bond transfer sales volumes into the figures,” he said, adding that could be one reason for the higher-than-expected sales volume for May.

According to market sources, a practice known as domestic bond transfers, in which trading companies having storage tanks are able to buy bonded fuel for their own tanks.  Other possible reasons for the surprise spike in May included stronger-than-expected demand, as well as price economics.

“Usually just before and after the Golden Week holidays, there are spikes in demand as more vessel companies try to arrange bunkering before Golden Week, and after that as soon as we finish the holidays they try to arrange as well,” a trader said.

The price spread between Japan 380 CST bunker fuel assessments and the Mean of Platts Singapore 380 CST high sulphur fuel oil assessments could have also played a part in swinging sales volume for May higher.

“Bunker fuel costs can be basis to MOPS [380 CST HSFO assessments], so if there is a decent spread [between MOPS 380 CST HSFO and Japan 380 CST bunker fuel assessments], that may be enough of a reason for vessel owners to buy more in May versus April,” a source said.

S&P Global Platts data showed that in April, the spread between Japan 380 CST bunker fuel and MOPS 380 CST HSFO assessments stood at $32.56/mt, while for May, the same spread was at $29.10/mt.  A narrower spread indicates relatively cheaper bunker fuel available in Japan.

Other traders said another possible reason was that Japan’s bunker prices in May was competitive to South Korea’s, which led to more vessel owners opting to buy bunker fuel from Japan.

But an analysis of bunker fuel prices for the two countries for the month of May showed that they were almost on par with each other.  Platts data showed that the average price of 380 CST bunker fuel in Japan stood at $248.55/mt in May.  The same grade of bunker fuel for South Korea in May averaged $247.02/mt.  This works out to a difference of $1.53/mt between the two countries.

Meanwhile, sales volume for Japan’s bonded marine diesel oil segment fell 12.1% month on month to 80,676 barrels in May.  On a year-on-year basis, marine diesel oil sales were up 56.4%.

Japan did not import bonded bunker fuel oil in May.  Bonded bunker fuel is exempt from import tax and can be sold only to ships plying international routes.

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Source: Platts

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