Marine fuel suppliers in the Mediterranean are expanding their offering of ultra-low sulphur fuel oil (ULSFO) with 0.1pc sulphur content, providing a fuel oil option that complies with emission control area (ECA) regulations. But shipowners have yet to switch.
As a result of operational difficulties and prices being marked close to marine gasoil (MGO), shipowners remain reluctant to switch to ULSFO — sticking with MGO volumes for consumption within ECA zones. The Mediterranean became an ECA on 1 May, constraining the sulphur content of fuels used within the region to 0.1pc for vessels not equipped with a sulphur scrubber. The ECA expansion means that the majority of European waters now fall within ECA zones, except for the Black Sea.
Suppliers reported an average discount of $15/t for ULSFO to MGO in the ports of Gibraltar, Algeciras, Malta and Piraeus. But availability constraints compared with MGO remain, and market participants added that ULSFO becomes a more viable option for buyers who operate fixed routes and so are able to pick up the fuel on a contract basis. Since ULSFO uses more blended products in its composition than VLSFO, it is often difficult to mix one type of ULSFO with one from another supplier, which could lead to potential compatibility issues.
And vessels sailing outside the ECA may opt for other bunker fuels since ULSFO leaves MGO tanks dirty or blocks VLSFO tanks.
Despite this, bunker fuel suppliers are investing in offering ULSFO in new locations. Since the start of ECA regulation, providers in at least three ports started offering ULSFO in the Mediterranean — in Istanbul, five of the six suppliers acting in the port now sell ULSFO. In June, Minerva started offering the fuel in Gibraltar, and Coral Marine made the same move in Piraeus.
Algeciras was the main supply point for ULSFO in the Mediterranean before April, with Repsol and Cepsa offering the grade. Zetaen Energy and Falzon Group also supply ULSFO in Malta, but demand in the port is still thin. ULSFO was already an option in Genoa, but spot demand has not risen since the start of the ECA, traders said. ULSFO has been available in Barcelona since before May, but most spot demand is for forward delivery rather than prompt, a local market participant said.
Demand for MGO has risen sharply since the start of the ECA mandate for vessels sailing in Mediterranean waters. Mediterranean imports of MGO have increased in line with demand, but MGO availability may still be insufficient to meet demand if the latter spikes sharply.
