Trouble in World’s Largest Ship Refueling Destination Boosts Fuel Demand!

According to a Platts report,  China’s marine fuel market has in the recent days got a much-needed boost due to a rise in valuations for the product in Singapore, as Ocean Bunkering Services, the bunkering arm of embattled oil trader Hin Leong Trading and one of the city-state’s top suppliers, exited the market.

What is it?

Marine fuel imported from Singapore accounts for most of China’s near 1 million mt/month bunker demand.

A firming of the retail market in the world’s largest ship refueling destination has helped lift spot market premium for IMO-compliant marine fuel at China’s major bunkering hubs of Shanghai and Zhoushan, said traders.

Demand Shift Away from Singapore

• Since reports of financial trouble at Hin Leong started trickling in a little over two weeks ago, the Singapore-delivered Marine Fuel 0.5%S bunker premium to the benchmark Singapore Marine Fuel 0.5%S cargo rose to $29.13/mt Friday from a record low of $7.39/mt on April 9, S&P Global Platts data showed.
• Reflecting this strength, the premium for Zhoushan and Shanghai-delivered 0.5%S marine fuel bunker to Singapore Marine Fuel 0.5%S cargo surged 53.79% week on week to average $14.21/mt in the week ended Friday, Platts data showed.

The spike in premium was a result of demand, which got a shot in the arm due to some demand shift away from Singapore to major bunkering hubs within the region, said traders.

China Getting Back Demand

China bunker demand has only been limping back to normalcy in recent weeks after the coronavirus pandemic destroyed demand to the tune of at least a third in February and March.

“Since the Hin Leong debacle [started], we have seen a slight rise in demand. Shipowners who initially had plans to bunker at Singapore have diverted to our ports due to concerns over barge tightness and waiting time at Singapore,” said a Beijing-based trader at one of China’s largest bunker suppliers.

Meanwhile, even as demand had not yet returned to pre-COVID-19 levels, it has picked up, especially in the recent past, as prices at Shanghai and Zhoushan were competitive compared with other neighboring bunkering hubs like Ulsan and Busan in South Korea, and in Singapore, said traders.

The 0.5%S marine fuel delivered in Shanghai and Zhoushan has averaged $227/mt as compared with $249.35/mt for similar grades delivered in Ulsan and Busan in South Korea, and $232.40/mt in Singapore, Platts data showed.

Singapore Fuel Imports

China still relies on imports from Singapore to meet the lion’s share of its demand , even as Chinese refiners ramped up IMO-compliant marine fuel production since Beijing implemented February 1 a rebate on value added tax and consumption tax on domestically produced low sulfur marine fuel for use as bonded bunker.

“Imports have decreased, but not substantially. Crude is at an all-time low and suppliers are bringing in [marine] fuel to store and sell when prices recover,” said the trader.

Hin Leong’s bunkering arm Ocean Bunkering Services, which is one of the top three bunker suppliers in Singapore, canceled all its bunker sales for delivery from April 18, Platts reported April 17 quoting the companies’ counterparties and traders.

Hin Leong and its bunkering and shipping arms together own and operate at least a couple of dozen or more bunker barges, accounting for a near 15% of the total Maritime and Port Authority of Singapore-licensed bunker barges in Singapore.