Suez Bunker Prices Fall Following Arrival of International Bunker Firms

The Suez Canal is a key chokepoint for global shipping. Image Credit: Suez Canal Authority

The recent arrival of international bunkering firms to Egypt has brought about a sharp price cut for VLSFO purchases at Suez.

Minerva Bunkering received its licence to supply bunkers at Egyptian ports in both the Mediterranean and Red Sea in the middle of May, and was followed shortly afterwards by Peninsula at Mediterranean Egyptian ports in early June.

These large international firms are able to leverage their global logistics networks to source product from more cost effective locations, resulting in lower prices compared to those witnessed previously in the country.

"Not only is pricing competitive, particularly so in comparison to bunkering alternatives further east, but from a total cost of bunkers perspective our offering in Egypt represents even more value to customers," a Minerva source told Ship & Bunker.

"Of the more than 70 deliveries we have performed thus far, the significant majority have been for vessels transiting the canal and taking bunkers during the time they are already waiting for their convoy departure.

"Our cargo sourcing for Egypt is integrated with our existing supply chain in the Mediterranean and Saudi Red Sea, so customers can expect the same superior fuel quality."

Prices Fall

As that lower-cost product beings to flow in to the country and compete with incumbent supply sources, it has also resulted in an unusually widened price spread.

In May, Ship & Bunker reported Suez VLSFO prices at $722.50-$770.50/mt, with an average of $742/mt. This equated to a premium to Brent of $171.50/mt, or 30%.

But over the past two weeks, Suez VLSFO ranged between $610.50-$720.50/mt, with an average of $676. This represented an average premium to Brent of $109/mt, or 19.2%.

On Thursday Ship & Bunker's Suez VLSFO midpoint was $42.50/mt over the price at Valetta in Malta, compared to a premium of $184.50/mt a month earlier.

The premium to Gibraltar was $33.50/mt on Thursday, down from $180/mt a month earlier, while the premium to Fujairah narrowed to $10.50/mt from $164/mt a month earlier. And Suez VLSFO came in at a $36.50/mt discount to Istanbul on Thursday, compared with a $117/mt premium a month earlier.

Minerva is understood to have deployed a 150,000 DWT floating storage facility for its Egyptian operation, as well as five delivery vessels. Peninsula has yet to reveal its local delivery infrastructure.

"Our experience so far indicates that our Egypt operation is already delivering outstanding value to our customers compared to other regional ports, and we have completed a number of deliveries with success," a Peninsula representative told Ship & Bunker.

"It is early days to give firm pricing levels but we can say Port Said will be a competitive bunkering port in the Mediterranean market alongside our existing physical locations in the Gibraltar Strait, Malta, Barcelona, and Tarragona."

The potential arrival of international firms had been under negotiation for more than a year with Egypt's Ministry of Petroleum and Mineral Resources having award licences to operate in the country in February 2022.

Now they have finally arrived their impact may also be felt in bunker markets outside the country, with one trading source telling Ship & Bunker the discount to Istanbul's price may draw some demand away from Turkey, where the bunker market has already seen significant demand pressure since the outbreak of war in Ukraine.

Ship & Bunker data indicates for 2022 bunker demand in Turkey fell 18% year-over-year.