China Seen Taking Bunker Market Share from Neighbours as Part of Wider Post 2020 Market Shake-Up

Thursday April 12, 2018

A global 0.50% sulfur cap on marine fuel that comes into force from January 1, 2020 will help China grow its bunker sales volumes by taking market share from its regional neighbours, according to the latest thinking from industry analysts.

The shift will be part of a wider demand shake-up for the world's major supply hubs driven by expectation that the majority of vessels will switch away from HSFO bunkers to lifting compliant MGO when the IMO2020 rule comes in effect.

Singapore, by far the world's biggest bunker market with 50 million metric tonnes (mt) sold last year, was one market at risk of losing out to China "as shippers look for alternative locations with a surplus of compliant fuels," Iain Mowat, a senior research analyst at Wood Mackenzie, said this week.

But the picture is muddied by the fact 0.50% sulfur blends will also make an impact on the makeup of the post 2020 market, although opinion differs as to what share these fuels will take.

"I think China will be big in MGO, but it is less likely they will be a major 0.50% player," says 20|20 Marine Energy's Adrian Tolson.

"I maintain that 2020 will be good for all the big blending centres that are also big ports with regional supply options, and Singapore is no exception."

But to better predict the impact on individual markets, and what the resulting shift in volumes could be at major bunkering hubs, Tolson says suppliers need to understand what types of vessel dominate the demand picture at each port.

"I think one of angles that everyone is missing is in understanding what ships call at a particular port and understanding what will those ships buy," says Tolson.

"For example, container companies, with high volumes of termed up purchases, will likely go for 0.5% blends. We've all heard that these fuels will face issues with commingling, but these buyers will be able to overcome that by securing a consistent supply source. Container companies account for maybe 20% of the global market, the others will go for MGO, at least in the initial phase."

This means ports that see a large proportion of calls from box ships, such as New York, should see a demand shift towards 0.50% blends. Ports dominated by tankers, for example, such as Houston and Fujairah, will see a shift to MGO.

Singapore, by virtue of its size, should see demand for a mix of all products.

Tolson will be further exploring the future outlook for the the post 2020 bunker markets at the upcoming IBIA Caribbean Bunker Conference being held in Jamaica April 17-19.

For more information on this event please click here: https://shipandbunker.com/events/icbc