Asia’s Hi-5 spread lowest since IMO 2020 as LSFO weakens, HSFO soars

Persistent weakness in Asia's low sulfur fuel oil market, along with the relative strength of high sulfur fuel oil amid limited supplies and stable downstream demand, has dampened the spread between the Singapore 0.5% S marine fuel oil and the benchmark HSFO cargo prices -- also known as the Hi-5 spread -- to its narrowest level since the International Maritime Organization (IMO) 2020 regulations came into effect over five years ago.

The sulfur emissions rules set by IMO 2020 restricted ships from using fuels containing more than 0.5% sulfur unless they are equipped with exhaust-cleaning scrubbers. This initially led shippers to switch from HSFO to cleaner fuels, resulting in a surge in LSFO demand. However, as the costs of scrubber installations have significantly decreased in recent years, the proportion of HSFO bunker sales has been on the rise, as new scrubber-fitted vessels have boosted consumption of high-sulfur grades.

The Hi-5 spread, which has narrowed nearly 66% so far in 2025, was assessed at $30.56/mt on March 11. The spread dropped to as low as $21.46/mt on March 7, the lowest level since September 2019, Platts data showed.

Higher arbitrage arrivals from the Western markets in March amid frail bunker demand have been weighing on Asia's LSFO fundamentals, while tighter availability of both compliant as well as sanctioned HSFO barrels and comparatively steady downstream demand have buoyed the HSFO market to milestone highs in recent weeks.

On one hand, the Singapore marine fuel 0.5%S cargo's differential over the Mean of Platts Singapore marine fuel 0.5%S assessment has flipped into negative territory for the first time since April 2024, while on the other, the benchmark Singapore 380 CST HSFO cargo's cash differential over the MOPS 380 CST HSFO assessment has surged to its highest level since August 2023, Platts data showed.

Platts assessed the Singapore marine fuel 0.5%S cargo's differential at a discount of $1.25/mt at the Asian close March 11, while the Singapore 380 CST HSFO cash premium, which has soared nearly 47% so far in March, was assessed at $21.79/mt March 11, Platts data showed.

The recent rally in the HSFO market, however, is expected to cool off in the coming days due to seasonal weakness in consumption from the power generation sector and sluggish feedstock demand from refiners resulting from high material costs, several trade sources said.

Meanwhile, the recent weakness in the Asian LSFO market has rendered the West-to-East arbitrage economics unviable in recent sessions, which is expected to cap Western inflows in April and help tighten the market balance. This comes at a time when bunker demand for the marine fuel is anticipated to experience a lukewarm uptick, especially following the seasonal demand weakness observed in February and March, sources added.

Singapore's HSFO bunker sales, inclusive of the bioblended grade, rose 0.8% year over year to total 1.671 million mt in January, while the sales of the IMO 2020-compliant low sulfur fuel oil, including the bioblended grade, amounted to 2.523 million mt across January, a sharp 13.2% drop year over year, data from the Maritime and Port Authority of Singapore showed.

In Singapore, the world's largest bunkering hub, continued lackluster demand fundamentals coupled with ample stockpiles in the LSFO segment have also contributed to the crunching Hi-5 spreads.

Although bunker traders in Singapore noted some uptick in downstream HSFO requirements in recent days, delivered premiums have been under pressure. This is despite elevated upstream HSFO valuations and steep backwardation in the prompt inter-month paper spreads, as downstream mechanics have been rather bleak amid a softer spot buying appetite.

The traders, however, anticipate an increasingly competitive spot HSFO market, as the high cost-of-carry would lead sellers to draw down stockpiles more actively.

With Hi-5 spreads significantly narrowing over the past couple of months, shipowners' cost-savings from existing scrubber-retrofitted vessels have sharply decreased, thereby extending the payout period for their scrubber investments.

Even though increased volatility and spiking HSFO valuations may create uncertainties for future scrubber investments in the near term, buyers also acknowledged that scrubber uptake would still yield some cost savings, despite the less-than-ideal conditions of the prevailing Hi-5 spreads.

"Shipowners and charterers of vessels with installed scrubbers continue to burn HSFO due to lower costs anyway, rather than swapping to consume LSFO bunker," a Singapore-based trader said.

Most recently, Singapore's delivered Hi-5 spreads tumbled to a multiyear low of $22/mt March 10, before recovering to $34/mt March 11, Platts data showed. This downstream Hi-5 spread was last assessed narrower at $20/mt Sept. 18, 2019.

Platts is part of S&P Global Commodity Insights.