Singapore's bunker fuel sales seen steady over coming months after Feb's drop

Singapore's marine fuel market is likely to be aided by stable to higher high sulfur fuel oil demand over the coming months following a lull in February, as scrubbers' installation increases steadily, market sources said.

Higher HSFO bunker sales will possibly somewhat offset the drop in Singapore's low sulfur fuel oil demand due to lower regional LSFO prices in Zhoushan and ready supply in South Korea.

"HSFO demand seemed stable, as shipowners still have requirements," a bunker supplier said. Spot HSFO demand could fluctuate daily, as prices have become more volatile since February because of the Russia-Ukraine conflict, according to the supplier.

Singapore's bunker fuel sales fell 13.2% month on month and 15% year on year to 3.50 million mt in February, according to preliminary data release by the Maritime and Port Authority of Singapore March 13. Sales of the International Maritime Organization-compliant grades dropped 10.7% on the month to 2.287 million mt in February.

Sales of high sulfur bunker, which includes the 180 CST, 380 CST and 500 CST fuel oils, declined 17.7% to a 20-month low of 924,200 mt in February, according to the MPA data.

Expectation of a favorable spread between the 0.5%S and 3.5%S fuel oil was likely to support HSFO sales at the world's largest bunkering port, market sources said.

"The scrubber payout period is still between two-three years, as the spread between low and high sulfur basis Singapore has been currently around $240/mt," S&P Global Commodity Insights said in a report earlier in March, adding that the technology was a key component in meeting international shipping's 2030 decarbonization milestone.

The global scrubbers fleet is currently around 4,500, according to the report, but it is likely to surpass the 6,000 mark by 2030.

"If we don't see penetration of clean alternative fuels, we believe scrubber usage near 7,000 would cover the shortfall even though scrubbers only eliminate SOx (sulfur oxide) and not CO2 emissions," the report said. "This will increase the HSFO bunker demand into 2030."

Some shipowners could be more inclined to charter their fleet to capture higher premiums amid soaring freight rates, instead of dry docking vessels for scrubber installations, while keeping scrubber investments in the pipeline, shipping company sources said.

Tepid LSFO demand

LSFO prices have surged in Singapore amid tight supply because of the Russia-Ukraine conflict, forcing buyers to defer purchases, or seek lower prices at other North Asian ports, such as Zhoushan. Suppliers expect balance March inventories to roll into the subsequent month, market sources said.

Shipping companies are likely to exhaust available supply options in April amid the strong outright prices, which have increased vessel chartering and operations costs, traders said.

"Buyers still have requirements but would minimize volumes," another bunker supplier said. "Or, divert to other ports where bunker prices are more competitive."

Surging freight rates have led shipping companies to skip bunker-only calls and opt for refueling at end-destinations, sources also said.

The number of bunker-only calls fell 10% on the month and 13.4% on the year to 2,805 in February, the MPA data showed.

"For container liners, there might be a shift of term contractual demand to North Asian ports from Singapore too," a third bunker supplier said.

South Korea and China's Zhoushan remain a popular LSFO bunkering destination.

South Korea's low sulfur bunker supply is expected to be sufficient to meet demand in March even though three refiners -- S-Oil, GS Caltex and SK Energy -- have scheduled a turnaround at their crude distillation units, bunker traders said.

S-Oil, GS Caltex, and SK Energy plan turnaround at their CDUs in March, S&P Global Commodity Insights reported earlier, citing company and industry sources.

Zhoushan, China's largest bunkering port, is also amply supplied with bunker fuel, with domestic production supported due to high marine fuel 0.5%S margins, sources said.

Delivered marine fuel 0.5%S price spread between Singapore and Zhoushan widened to an average of $6.56/mt in February, from an average of 2 cents/mt in January, according to S&P Global. The spread averaged $6.10/mt over March 1-14.

Clean energy transition

Over the long term, Singapore aims to supply low- and zero-carbon marine fuels, including biofuels, methanol, ammonia, and potentially hydrogen, while also enabling green technologies, such as carbon capture, storage, and utilization.

The MPA March 9 unveiled the Maritime Singapore Decarbonization Blueprint that sets out ambitious and concrete long-term strategies to accelerate the adoption of clean energy alternatives in the shipping industry by 2050. The MPA has committed additional funds of at least S$300 ($220.81) million to support such initiatives.

The plan outlines seven key areas of focus, including port terminals that will transit to a low-carbon future through the adoption of clean energy, automation, and digitalization by 2030 and net zero emissions by 2050.