Singapore — Shanghai International Exchange, or INE, completed the first physical delivery outside of China against its tax-free very low sulfur bunker fuel oil futures on Jan. 19-21 in Singapore, it said Jan. 22.
The exchange said the successful delivery paves the way to apply the instrument to its other futures, such as technically specified rubber 20 (TSR20) and Bonded Copper.
Three overseas players participated in INE's January VLSFO contract LU2101 to get a total 3,500 mt of warehouse warrant for physical delivery, INE said.
These three companies are Trafigura Pte.Ltd., Freepoint Commodities Singapore Pte.Ltd., and China-Base Resource Singapore Pte.Ltd, while the LU2101 was settled at Yuan 2,408/mt ($372.21/mt) in December, INE's data showed.
After negotiation, the three companies signed contracts with PetroChina International (Singapore) Pte Ltd. to take the delivery from Singapore, at the settlement price of February futures contract LU2102 on Jan. 4 which was Yuan 2,647/mt ($409.15/mt).
In comparison, S&P Global Platts' Marine Fuel 0.5% FOB Singapore Cargo price was assessed at $409.6/mt on Jan. 4 and $394.82/mt on Dec. 31, respectively.
By Jan. 21, about 2,500 mt of VLSFO have been delivered from PetroChina International (Singapore) Pte Ltd.'s tanks in Singapore, including the Universal Terminal.
The 1,000 mt VLSFO received by Freepoint has been sold to Petramina, which will be co-loaded in Indonesia's Pulau Sambu to supply to bunkering market, according to INE.
Trafigura's 1,500 mt will directly supply for bonded bunkering in Singapore.
The rest 1,000 mt to China-Base Resource will be delivered on Jan. 22-24, which will be sold to bunker supplier Equatorial Marine Fuel Management Services Pte. Ltd., INE said.
INE's VLSFO contract became China's first futures contract to allow delivery outside of China on Dec. 14, when the exchange publish the rules for the instrument.
One the same day, INE approved PetroChina International Co., Ltd. as its first group delivery center for the instrument.
Meanwhile, the state-owned trading house's subsidiary PetroChina International (Singapore) Pte.Ltd. as well as PetroChina International (Middle East) Co.,Ltd. are approved as overseas commodity storage facilities for the futures, and PetroChina International (Zhejiang) Co., Ltd. in China's Zhejiang province as the group delivery factory, S&P Global Platts reported.
Under the rules, a market participant with approved commodity storage facilities in a designated location overseas that has VLSFO stocks would be allowed to deliver the barrels to a futures contract counterparty at INE's front month contract settlement with a differential for 15-30 days loading.
WAREHOUSE WARRANT GENERATION
To facilitate the first delivery, the group delivery factory PetroChina International (Zhejiang) sent 3,800 mt of VLSFO to generate warehouse warrant on Dec. 23, while the group delivery center PetroChina International published its differential on INE's platform for 15-30 days loading since Dec. 24.
LU2101 was the first front month contract since INE launched the VLSFO futures on June 22.
Including the 3,500 mt for delivery in Singapore, total delivery of LU2101 was at 46,600 mt, value of which was at Yuan 116 million, INE said.
Among the deliveries, 29,400 mt have been supplied for bonded bunkering at China's ports.
In addition to Trafigura, Freepoint and China-Base Resource, few other international companies also participated in trading, such as Rich Fortune International Industrial Ltd., Honors Commodity Singapore Pte. Ltd.
Counterparties taking deliveries at overseas locations would be confined to international participants, as China's domestic players are restricted by rules set by the State Administration of Foreign Exchange and General Administration of Customs.