FEATURE: After 2021 feat, Singapore's bunker industry aspires for more growth amid hurdles

Singapore's bunker industry wrapped up 2021 with marine fuel sales of close to 50 million mt, the second-highest total on record, with HSFO lifting overall volumes but cleaner fuels are also receiving due impetus as the city-port gears up to maintain its vigor in 2022.

"The transition towards alternative bunker fuels, such as LNG, ammonia, or hydrogen, and regional competition from North Asian ports, particularly China, may gradually chip away at Singapore's VLSFO sales volumes slightly," a Singapore-based bunker supplier said. However, Singapore stays "the most viable go-to location for HSFO bunkers" due to limited supplies in other parts of the region, he added.

Traders polled by S&P Global Platts noted that the proportion of HSFO marine fuel sales in Singapore's overall bunker mix is set to rise a further 2-5 percentage points in 2022.

Singapore's 2021 HSFO bunker sales surged by 21.63% on the year to 12.89 million mt and accounted for 25.8% of total sales compared with 21.3% a year prior, according to data from the Maritime and Port Authority of Singapore. This came as a favorable Hi-5 spread, the differential between IMO-compliant LSFO and the erstwhile mainstay 380 CST HSFO, boosted scrubbers' installations, which are set to stay robust reflecting the potential future spread.

The Hi-5 spread has been "very high in Singapore ... much higher than in the US or Europe, but I still see the Hi-5 widening some more," Adrian Tolson, director of global research and consulting company BLUE Insight told Platts in an interview recently.

The spread between benchmark Singapore marine fuel 0.5%S cargo and Singapore 380 CST HSFO cargo averaged $119.69/mt in 2021, up from $96.91/mt in the previous year, Platts data showed. The spread rose 82.43% to average $126.17/mt in the second half of 2021 compared to the H2 2020 average.

"Scrubber payback on large containerships is much less than one year for new builds and not much more for retrofits. Still, the bias for installation remains with bigger ships calling at bigger ports," Tolson said, adding the move toward scrubbers has continued to push HSFO growth in major container ports.

This comes as total container throughput in the city-port hit a record high of 37.5 million twenty-foot equivalent units last year despite COVID-19 related hurdles, with the port handling 599 million mt of cargo in 2021.

Shifting gears

Singapore has seen some big bunker suppliers and trading companies getting wiped out in the past due to strict checks by the MPA to curb industry malpractices.

While some exits were forced after irregularities were discovered related to mass flow meters and other aspects, some were voluntary as margins remained depressed worldwide, causing Singapore's accredited bunker supplier list to shrink from over 50 in September 2017 to 41 at the start of this year.

Among the latest casualty was Hin Leong Trading, which collapsed in 2020. Both, Ocean Bunkering Services and Hin Leong Marine International, bunkering units of Hin Leong, dropped off the MPA bunker suppliers list in 2021.

TFG Marine and Minerva Bunkering swiftly stepped in to fill the void. TFG Marine moved up 11 places from 16th position in 2020 to 5th rank in 2021 and Minerva Bunkering advanced nine places from 2020 to rank 13th in MPA's 2021 top accredited bunker suppliers ranking by volumes.

Lackluster margins from downstream deliveries of the International Maritime Organization-compliant bunker fuel led some suppliers to trim barge fleets in a bid to optimize costs, according to market sources, while barging spreads need to be at least $5-$8/mt to offset operational costs.

According to the latest MPA data, the number of registered bunker barges stand at 209, including an LNG bunker barge, following the addition of two marine gasoil barges in September. This compares with 210 in March 2021 and 215 in July 2020.

The spread between delivered and ex-wharf Singapore marine fuel 0.5%S bunker, also known as the barge spread, averaged $6.61/mt in 2021, down from $11.29/mt in 2020, Platts data showed.

Still, Singapore stayed resilient, continuing to be a dominant shipping center and one of the few ports worldwide facilitating crew changes and other initiatives to minimize disruptions to the supply chain.

In January, demand for delivered marine fuel 0.5%S bunkers slowed down reflecting low inventory levels and limiting availability of VLSFO meeting commercially agreed specifications, a second bunker supplier said.

Buyers were seen either bidding at competitive levels or holding back inquiries amid the high flat price environment, market sources said, adding that amid stiffening regional competition for LSFOs, some suppliers have diversified their offerings by to include VLSFO.

Cleaner fuels thrust

Singapore also sold a total of 50,000 mt of LNG as bunker fuel last year, and commenced regular ship-to-ship LNG bunkering operations from March.

TotalEnergies Marine Fuels, which was known as Total Marine Fuels earlier, became the third player to be awarded an LNG bunker supplier license in Singapore for a five-year term starting Jan. 1, 2022, the MPA announced in February. In a recent white paper, TotalEnergies said that the global LNG bunker market could reach 10 million mt a year by 2025 and represent 10% of the bunkering market worldwide by 2030.

Meanwhile, in addition to LNG, Singapore is also mulling over other alternatives such as hydrogen and ammonia, as well as deployment of electric harbor crafts.

In August, the MPA also announced the formation of the Global Centre for Maritime Decarbonization in Singapore to spearhead the maritime industry's energy transition journey.