Bunker Market Braces for Tariff Impact as Prices Near Four-Year Lows

Bunker prices are approaching lows not seen since early 2021. Image Credit: Ship & Bunker

The bunker markets are awaiting the impact of widespread new tariffs on global trade, with VLSFO prices nearing the lowest level in four years.

The Trump Administration announced widespread tariffs on imports from almost every country trading with the US late on Wednesday, raising the prospect of a significant slowdown in global trade. On Friday China announced a retaliatory 34% tariff on its imports from the US, while the response from the EU and elsewhere remains to be seen.

Further retaliation from other parts of the world, along with a ratcheting-up of tariffs from the US in response, could lead to a significant drop in tonne-mile demand for shipping, along with the risk of a global recession.

Bank of America has suggested the new US tariffs could cut global container freight volumes by as much as 5.7%, with Asia-US routes seeing the largest impact.

ICE Brent crude futures have slumped by more than $10/bl since Wednesday's close, with the June contract trading at $64.10/bl as of 12:05 PM on Monday - a 14.4% drop from the end of Wednesday.

Bunker prices thus far have started to follow suit, but lagging behind the moves in crude. Ship & Bunker's G20-VLSFO Index of prices at 20 leading bunkering locations was at $548.50/mt on Friday, down by 3.3% from Wednesday's level. 

But with bunker price indications coming in on Monday as much as $30/mt or more below Friday's level, more declines are on the way.

"For now, we have to wait and see what happens," a European bunker trader told Ship & Bunker on Monday.

"Ships are still on the water, and we'll still be selling to them.

"But what that picture looks like a month from now is not so certain."

VLSFO price moves tend to lag rapid moves in the crude market as suppliers with hedging in place seek to resist pressure to lower their prices in line with crude futures. But those suppliers without hedging will be in a more vulnerable position, and buyers with optionality around where their vessels bunker will be looking out for these suppliers this week to find the lowest possible prices.

Of the top four bunkering ports, Rotterdam saw the sharpest losses on Friday, with a $27/mt decline in VLSFO prices. Some indications have already arrived for Monday with prices as low as the high $430s/mt, which would be the lowest price since February 2021.