- Hi-5 spread supports scrubbers installations
- COVID-19 related hurdles, transparency, margins squeeze hurt industry
- Decarbonization talks gaining momentum; fossil fuels to still dominate
Shipping’s tryst with scrubber installations continues to find favor as the Hi-5 spread stayed fairly wide, particularly in the second half of 2021, with the differential only set to “widen a little more” this year, global research and consulting company BLUE Insight’s director Adrian Tolson said, reports S&P Global.
The increase in spread
“It’s been very high in Singapore … much higher than in the US or Europe, but I still see the Hi-5 widening some more,” Tolson told S&P Global Platts in an interview.
The spread between benchmark Singapore marine fuel 0.5%S cargo and Singapore 380 CST HSFO cargo averaged $119.69/mt in 2021, up from $96.91/mt in the previous year, Platts data showed. The spread rose 82.43% to average $126.17/mt in the second half of 2021 as compared to the H2 2020 average.
Scrubber payback on large Boxships
Scrubbers in new builds have almost negligible cost and so large new builds are installing them, Tolson said.
“Scrubber payback on large containerships is much less than one year for new builds and not much more for retrofits. Still, the bias for installation remains with bigger ships calling at bigger ports,” he said, adding that the move towards scrubbers has continued to push HSFO growth in major container ports, where it is close to 30% of demand.
Globally, however, this figure is probably still just under 20% because it is generally not that readily available in smaller ports, Tolson said.
Sales of HSFO
In Singapore, the world’s largest bunkering port, sales of HSFO, which includes 180 CST, 380 CST and 500 CST bunker fuel, increased 0.9% from October to1.193 million mt in November, latest data from the Maritime and Port Authority of Singapore showed. It comprised 28.2% of total bunker sales in November, the data showed.
HSFO sales volumes from January-November 2021 stood at about 11.74 million mt, up about 22.6% compared to the same period in 2020. Singapore’s January-November HSFO sales in 2021 accounted for about 25.63% of the total marine fuel sales there during the same period.
According to S&P Global Platts Analytics estimates, the share of HSFO within the global marine fuel demand mix is likely to rise to 21% in 2023 from 15% in 2020, and further to 28% by 2030.
As far as overall marine fuel sales including HSFO were concerned globally, Tolson said that he was “optimistic about 2022 bunker supply volumes.”
Industry hurdles
The biggest challenge in 2021 was faltering profits in the bunker supply chain and 2022 was still going to be a challenge as the market still needs to find some ‘decent’ trading margins, Tolson said.
Transparency in bunkering was another area of concern, Tolson said.
The momentum in this direction was started by Singapore, where the use of mass flow meters for fuel oil deliveries were mandated from Jan. 1, 2017, and the use of MFMs for all distillate bunker deliveries from July 1, 2019.
MFMs measure the flow rate in the pipe, gauging the quantity as well as the mass and density of the fuel.
“As other bigger companies pay attention to bunkering, they are asking the question of why the industry is so mysterious, hard to understand and often involving questionable practices,” Tolson said.
“Minerva Bunkering’s ADP [Advanced Delivery Platform] is addressed to these issues as are some of the efforts of TFG Marine and indeed a lot of the current work within IBIA’s working groups,” he said.
Another big challenge is to get back to a more normal world as the industry continues to suffer because of the pandemic, he said.
Diving into decarbonization
The move to decarbonization is quite revolutionary for the bunkering business, with buyers and shipowners needing to forge closer relationships with the supply chain to get the low carbon fuels that the consumer and shippers are demanding, Tolson said.
“The balance of power has shifted and cooperation along the supply chain becomes important — managing this cooperation, adjusting the terms of business and the length of commitment is the real challenge for everyone now,” he said.
Fossil fuels will likely still dominate for two or more decades as alternatives will evolve but not be available in enough volumes to massively change the bunker fuel mix, Tolson said.
“I think the better alternatives will get gobbled up for land (or air) based usage. Sure, we will see more LNG, quite a lot of green methanol (the easiest simplest drop in option) and small amounts of green ammonia but if all these three get much beyond 20% by 2040 I will be surprised,” Tolson said.
He expects to see owners using less fuel, operating more efficiently, and making real efforts at carbon capture on vessels.
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Source: S&P Global
