Tokyo — Japan's largest refiner JXTG Nippon Oil & Energy has, for the first time, tentatively set the price for the supply of its low sulfur bunker fuel oil to coastal vessels for the period October-December, sources familiar with the matter told S&P Global Platts Friday.
JXTG's 0.5% sulfur bunker fuel oil price for October-December will also set the tone for the value of the fuel, which complies with the International Maritime Organization's global sulfur mandate, for domestic shipping accounts for 40%-50% of bunker fuel supply in Japan.
Japan's potential LSFO demand for bunkering is estimated to be around 100,000 b/d, according to S&P Global Platts calculations based on market information. This includes demand from domestic coastal vessels, which account for roughly half of domestic demand.
Japan's coastal ships will switch to low sulfur bunker fuel oil by the end of the year, according to industry sources. At the moment, more than half of their bunker fuel requirement is met by high sulfur fuel oil.
But the speed at which coastal shipping will switch fuels will be slower than that of ocean liners, but it is expected to pick up in November, according to a supply source.
JXTG Nippon Oil & Energy is looking for its low sulfur bunker fuel oil with 0.5% sulfur content to be sold at Yen 57,780/kl ($85.58/b) for October-December, according to sources familiar with the matter. This price is likely to be finalized by the end of December, one of the sources said.
When contacted, a JXTG Nippon Oil & Energy spokesman declined to comment on the price of its low sulfur bunker fuel.
JXTG's low sulfur bunker fuel price came to light after it started supplying 0.5% sulfur bunker fuel that complies with the IMO mandate at the majority of its refineries across Japan on October 1.
"Japanese shipping companies are using Platts Marine Fuel 0.5% bunker prices as a benchmark for bonded bunker. The contract prices for the fourth-quarter and the first-quarter of next year are flat to a premium of $5/mt to Platts Marine Fuel 0.5% bunker prices for delivery to Tokyo Bay," a market source, who is buying bonded bunker fuel, said.
"There is not so much for spot availability of 0.5% sulfur bunker fuel. About 80%-90% of bonded bunker fuel from Japanese refineries will be sold based on term contracts," a bunker trader said.
Platts assessed Tokyo Bay Marine Fuel 0.5% bunker fuel oil at $591.25/mt ($93.11/b or Yen 63,269/kl) on Thursday, compared with $413/mt for 380 CST fuel oil with maximum 3.5% sulfur.
The IMO will cap global sulfur content in marine fuels at 0.5% from January 1, down from the current 3.5%. This applies outside the designated emissions control areas, where the limit is already 0.1%.
Since the start of the supply of IMO-compliant bunker fuel, JXTG has been ready to supply 0.5% sulfur bunker fuel oil at eight refineries -- all of the refineries it had planned to supply the fuels from, the spokesman said.
Low sulfur IMO 2020-compliant fuels are now available at JXTG's 145,000 b/d Sendai refinery in the northeast, 197,100 b/d Kashima refinery in the east coast, 270,000 b/d Negishi refinery and 129,000 b/d Chiba refinery in Tokyo Bay; 135,000 b/d Sakai refinery, 320,200 b/d Mizushima refinery, 120,000 b/d Marifu refinery in the west; and its 136,000 b/d Oita refinery in the south west.
JXTG is also ready to supply IMO-compliant bunker fuels at three oil terminals in Niigata in the northwest as well as in Kitakyushu and Nagasaki in the southwest, leaving the terminals in Muroran in the north, Sakaiminato in the west and Kagoshima in the southwest left to start, the spokesman added.
JXTG's 0.5% sulfur bunker fuel oil is only available for ocean liners at its Sendai and Marifu refineries, with Kashima, Chiba, Negishi, Sakai, Mizushima and Oita refineries supplying IMO-compliant fuel oil for both ocean liners and coastal vessels. However, all of its IMO-compliant bunker fuel supply is available only for coastal vessels at the six oil terminals.
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