Zhoushan's Sep bonded bunker sales fall on typhoon impact

Sales of bonded bunker fuel oil at the key North Asian bunkering hub Zhoushan fell 7.9% month on month to 601,900 metric tons in September, according to data compiled Oct. 15 by S&P Global Commodity Insights, hampered by back-to-back typhoons and the Mid-Autumn holidays.

The fall in September’s bonded bunker sales came after a strong rebound on the month in August, which saw the third highest monthly sales in the year to date at 653,600 metric tons. September sales also represented an 8.3% contraction year on year.

Bunker sales for the January-August period were flat, inching down 0.03% on the year to 5.43 MMt, Commodity Insights data showed.

September saw the market share of the three largest companies at Zhoushan edge down for the third straight month, to 76.2% from 78% in August.

Sinopec Zhejiang Zhoushan retained its top spot, unchanged on the month at 33.4% of the market share by sales volume, while PetroChina’s share shrank further from 30.9% to 23.9%. Chimbusco regained ground in the market, rebounding from a 13.7% share to 18.9%.

The parties involved in the compilation of the bonded bunker sales data included the local customs authority, the management committee of the Zhoushan free trade zone, as well as Zhoushan's harbor administration and port association, according to sources familiar with the matter.

In line with market expectations, September LSFO output at China's refiners dropped to 993,000 metric tons, the lowest in 2024 and down by 14% from a month earlier, data from local energy information provider JLC showed. The output was 15.13% lower from September 2023.

According to an analyst with JLC, LSFO output is likely to fall further in Q4 due to limited export quotas, and more LSFO is likely to be imported as a supplement.

The LSFO produced by China’s refiners is mostly exported as bonded bunker fuels for bonded zones in Chinese ports, bunkering the outbound vessels, which is ultimately regulated by the export quotas. In addition to the domestically produced barrels, suppliers also import from overseas for bonded bunkering.

China so far has allocated a total of 13 million mt of export quotas for LSFO, down by 1.29% year on year.

September saw patchy demand, cycling through periods of above-average demand to a complete lull, amid the impact of back-to-back typhoons and the Mid-Autumn holidays. Typhoon Pulasan and Bebinca halted bunkering for at least one week in mid-September, resulting in order cancellations of at least 10,000 metric tons.

Additionally, the headline Caixin China General Services Business Activity Index stood at 50.3 in September, down 1.3 points from August. While still indicating expansion since the start of 2023, growth slowed for a second consecutive month.

However, the month ended with tight LSFO supply, with at least two key suppliers running short of the bunker grade and availabilities heard delayed till as late as Oct. 8, after China’s key Golden Week holidays over Oct. 1-7.

Platts, part of Commodity Insights, assessed the Zhoushan-delivered 0.5% sulfur marine fuel bunker premium to benchmark FOB Singapore marine fuel 0.5% cargoes at an average of $32.13/metric ton in September, drastically widening from $19.60/t in August and $12.91/t in July.

The premium has averaged $38.94/t in October to date and stood at $28.88/mt Oct. 14.

The spot differential for Zhoushan-delivered LSFO against the same delivered grade in Singapore averaged a premium of $5.29/t in September, reversing from the discount of $6.71/t in August, Platts data from Commodity Insights showed.

The premium has narrowed from its highs in the first week of October, averaging $17/t in the month to date and $8/t on Oct. 14.