COMMODITIES 2025: Singapore biobunker suppliers eye bio-HSFO market on regulatory demand boost

This is part of the COMMODITIES 2025 series where our reporters bring to you key themes that will drive commodities markets in 2025.

Global biobunkers demand is set to rise in 2025, driven by upcoming maritime decarbonization regulations such as the EU's FuelEU Maritime, and the Singapore market stands to benefit from it, market participants told S&P Global Commodity Insights.

The FuelEU Maritime policy, which will enter into force from Jan. 1, targets a 2% decrease in greenhouse gas intensity by 2025, progressing to an 80% reduction by 2050, through limiting the yearly average well-to-wake GHG intensity of ships above 5,000 gross tonnage calling at European ports.

"As the regulatory support increases, of course, the demand for the green molecule, the renewable fuel, also increases," said Maersk Oil Trading's CEO Emma Mazhari.

Maersk Oil Trading was Singapore's top biofuel bunker supplier in 2023, according to data from the Maritime and Port Authority of Singapore.

The steep premiums on biobunkers compared to conventional fuels deterred some shipping lines from incorporating biobunkers into their fuel mix, but potential Singapore-based buyers noted that biobunkers would be more seriously considered with the additional regulatory push.

Moreover, high feedstock costs and reduced production in China have led to tightened UCOME volumes in Asia, which are anticipated to persist through the first quarter. Singapore biobunker premiums could remain supported by elevated biocomponent costs in the early months of 2025.

Platts assessed Singapore delivered spot prices for the B24 LSFO-based blend rangebound within mid-$120s/mt to $140/mt over the Platts benchmark FOB Singapore Marine Fuel 0.5% sulfur cargo assessments in the last quarter of 2024.

CII remains strong demand driver

The Singapore bunker fuel hub welcomed a 66.6% year-over-year growth in total biobunker sales in the first 11 months of 2024, marking a new high at 776,300 mt, preliminary data by the MPA showed.

The IMO's mandatory carbon intensity indicator and CII rating reporting was a strong regulatory demand driver in Singapore and is expected to remain so going into 2025, as shipowners are pressured to meet renewed CII targets.

"A number of vessels are Grade E this year, and those shipowners decided not to take biobunkers because that will only improve [the CII rating] to Grade D. But they must do something next year, to show action after submitting their action plan," an Asia-based supplier said.

Increasing bio-HSFO supply

Singapore also witnessed a marked increase in bioblended HSFO bunker fuel sales this year, with such growth anticipated to continue in 2025.

Singapore's bioblended HSFO bunker fuel sales totaled 77,300 mt from January through November, jumping from 5,600 mt in the same period in 2023, based on MPA data.

This growth is supported by the increasing number of scrubber-fitted ships entering the global fleet amid broader scrubber acceptance within the industry.

"There will be more and more Singapore bio-HSFO suppliers," a biobunkers supplier said, as growing demand attracts participants looking to enter this less saturated market.

More inquiries regarding higher concentration blends like B30 and B100 have emerged this year.

The primary biobunkers blend available in Singapore now is B24 -- typically 24% UCOME and 76% conventional fuel oil. Blends exceeding 24% of biofuels would be subjected to MARPOL Annex II regulations and only a limited number of suppliers possess the required barges permitted to ship MARPOL Annex II cargoes.

More suppliers have strategically placed orders for Type II chemical barges, which are allowed to carry blends of more than 24% biofuels, market sources noted.

However, "acquiring Type II barges may not be worth the investment, because buyers are not willing to pay the B30 premium anyway," a supplier said.

Nevertheless, the supply of higher-concentration blends is expected to grow and ease premiums on such blends.

"There will be many Type II barges coming into the market in 2025, and [the high premium on B30 and B100] is only temporary," another Singapore-based supplier said.

Emerging regional ports

Other regional ports such as China's Zhoushan are also looking to cash in on the growing biobunker demand. China is considering to issue 500,000 mt of B24 biodiesel-blended bunker export quota for 2025, partly to support biodiesel producers faced with EU antidumping duties since Aug. 16.

However, China's competitiveness as a biobunkers hub will ultimately depend on the price, ship routes and buyers' acceptance of China-origin feedstock, market sources said.

"Demand in the Asia region would definitely go up, but the distribution of demand is hard to say," a supplier added.

"The new year's situation is very dynamic, many variables at play, so there is a lot to look out for."