Lower Bunker Fuel Prices In China Draw Demand

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Lower bunker fuel prices in China following tax changes last year are drawing demand away from the key regional bunkering hub of Singapore and other ports, says an article published in SPGlobal.

Singapore based traders on Chinese fuel price

“Prices are so low in China there is no reason not to go to China now,” a Singapore-based bunker trader said.

Zhoushan and Shanghai, Chimbusco and Sinopec Zhoushan are competing with each other fiercely to expand market share.

“A key factor that has depressed overall demand in Singapore is the marine fuel 0.5%S spread between the port of Singapore and Zhoushan. Shipowners have been maximizing stems while queuing at anchorage for cargo operations around Zhoushan,” said another Singapore-based trader.

The trader added that, “this has capped bunker demand around Singapore for the whole of April. The best-case scenario is that bunker sales in April might be on par with March volumes, but a slight reduction is more likely.”

Chinese refinery increases oil production

Chinese refineries have significantly expanded fuel oil production ever since Beijing allowed a value-added tax rebate on domestically produced low sulfur fuel oil barrels supplied to the country’s bonded zones from February last year. China’s output of low sulfur bonded bunker fuel surged 131% year on year to 2.69 million mt in the first quarter, data from local information provider Longzhong showed.

The cost of locally produced bunker fuel oil is lower than imported cargoes.

A source at a trading house said, “Chinese refiners equipped desulfurization units, and they don’t need extra investment to produce low sulfur bunker fuel. That is why Chinese refiners can offer bunker fuel at competitive prices.”

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Source: SPGlobal

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