Singapore’s bunker industry dynamics are changing due to increased competition and the enforcement of mass flow meters, a move which has no doubt increased transparency but has also escalated costs. Surabhi Sahu, bunker fuels editor, examines how these factors are affecting market players and the industry as a whole.
Singapore's changing bunker fuel industry dynamics
By Surabhi Sahu, Bunker Fuels Editor
Welcome to The Snapshot – our series examining the forces shaping and driving global commodities markets today. In this episode, let’s take a look at what’s happening in the world’s top bunkering port – Singapore.
Singapore’s bunker fuel sales in 2016 rose over 7% year on year to a record 48.6 million mt. And looking at data from January to September, sources expect Singapore bunker sales to hit 50 million mt. In contrast, volumes done at Fujairah, the world’s second largest bunkering port, was estimated to be at least 12 million mt in 2016.
While bunker sales in Singapore are expected to rise steadily, the number of players has been shrinking. This is in line with expectations of market participants, due to increased competition and the enforcement of mass flow meters back in January. MFMs measure the flow rate in the pipe, gauging the quantity as well as the mass and density of the fuel.
Singapore is the first country worldwide to make MFMs for fuel oil deliveries mandatory.
MFMs have increased transparency by curbing industry malpractices. But MFMs have also increased barging costs.
According to industry sources, depending on the parcel size, the cost of supplying bunker fuel via MFMs is about $4-$10/mt higher than without it.
Aegean Marine Petroleum recently announced its plan to voluntarily exit the Singapore market as a physical supplier from 2018 while retaining trading and support functions.
Uni Petroleum did not apply for a renewal of its bunker supplier license.
Universal Energy and Panoil Petroleum exited the industry after the Maritime and Port Authority of Singapore decided not to renew their bunker supplier licenses, which expired in August.
And Transocean Oil is the latest casualty. The MPA on November 6 said it had revoked on the same day the bunker supplier and bunker craft operator licenses of Transocean.
Platts data showed that the daily spot spread between delivered and ex-wharf 380 CST bunker averaged $3.74/mt last month, up from $2.45/mt in October 2016. The number itself shows the squeeze in suppliers' margins.
Rising costs do not bode well for some bunker players, particularly the smaller ones, who are already grappling with tough conditions in shipping. Shrinking margins and the threat of elevated counterparty risks are also adding to their woes.
Still, some say that the MFM is the need of the hour and an important step towards ensuring the bunker industry is 100% ethical.
After Singapore’s move, has the time come for other ports too to clean up their spill?
Until next time on the Snapshot, we’ll keep an eye on the markets.