Bunker suppliers with chemical bunker tankers are taking advantage of the growing demand for biofuels by charging premium prices for their deliveries. According to Engine, this demonstrates the potential benefits of investing in specialized infrastructure for emerging fuel types.
Chemical Tanker Investments
In the past week we have seen delivered 100% used cooking oil methyl ester biofuel (UCOME B100) indicated way above our estimated UCOME cargo price in Singapore. If bunker suppliers fix stems at these price levels, it could help their payback times on chemical tanker investments.
To break down our estimate, PRIMA Markets has assessed UCOME FOB China – a major producer – at $1,000-1,015/mt in the past week. The freight rate for a 40,000 mt medium-range tanker sailing from China to Singapore has been $15/mt. Delivered B100, meanwhile, has been indicated at $1,290-1,300/mt, which leaves $260-285/mt to cover logistics costs like storage, handling, and delivery to a receiving ship with a chemical bunker tanker.
That looks like a chunky bunker margin compared to estimates from the ARA, where we have recently seen delivered UCOME B100 fixed at both $5/mt premium and $5/mt discount to Argus UCOME barges, a key benchmark for UCOME pricing in the region. B100 bunker prices are sharper in the ARA not just because of a more established pricing index, but because a greater number of suppliers can offer B100. The same biofuel delivery vessel restrictions do not bind them as in other bunker locations.
So-called IMO Type II chemical tankers – which can also typically supply methanol – are required to be allowed to supply bio-bunker blends above 25% in ports outside of the ARA, where stems are delivered by river barges exempt from the IMO rules. A growing number of bunker suppliers have invested in them, but only a few of these vessels have entered into operation yet.
Higher Biofuel Content
TFG Marine’s Singapore entity will take four of Consort Bunker’s vessels and one of Fratelli Cosulich’s vessels on time charters. TotalEnergies and Mitsui & Co. have both supplied B100 in Singapore with Global Energy’s Maple chemical tanker.
Because of early entries into this burgeoning B100 market, these suppliers are among the only 1-3 suppliers in a given bunker location. Biofuel bunker demand to date has mostly revolved around Scope 1 and 3 emission reductions, with container liners and car carrier companies as typical uptakers.
But with FuelEU Maritime less than a month away, more companies will be enquiring about stems with higher biofuel contents. They will run some vessels on B100 and average out their greenhouse gas (GHG) intensity reductions across a pool of vessels, or sell their compliance surpluses in one of the many over-the-counter markets that have popped up.
That leaves a golden pricing window for forward-thinking bunker suppliers as biofuel goes from niche to necessity for more EU-trading vessels.
In other alternative news this week, a string of headlines showed that LNG is still very much in vogue.
LNG bunker supplier Titan has expanded a deal to supply mass-balanced liquified biomethane (LBM) to Norwegian shipping firm United European Car Carriers (UECC) dual-fuel LNG vessels. Since July, over 95% of the fuel delivered to UECC’s vessels by Titan has been mass-balanced LBM.
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Source: Engine
