Panama bunker sales fell amid quality concerns

Panama high-sulphur marine fuel sales fell to 278,736t in November, after peaking at an all-time monthly high at 398,360t in March. Bunkering interest declined starting the end of April, when contaminated residual bunker fuel from the US Gulf coast found hit the Panama market and caused damage to some of the vessels burning it.

High-sulphur bunker sales dropped by 4pc to 3.75mn t from January through November, compared with 3.92mn t during the same period in 2017.

Uncertainty around the quality of high-sulphur fuel oil lingered through the third quarter of 2018. Once the contaminated fuel is mixed in the vessel tank with any remaining bunkers, it can be difficult to prove the source of the specification problems. In addition, depending on the individual vessel engine configuration, the same fuel that has caused issues with one vessel might not be harmful to another vessel.

Thus far there has been only lawsuit involving Panama contaminated bunkers this year filed with a US court. Greece-based ship managing company Meadway Shipping and Trading sued Denmark-based charterer Integrity Bulk ApS for $2.15mn in damages to the 37,070 deadweight bulk carrier Asl Luna. Integrity Bulk fueled Asl Luna in Balboa, Panama and the newly loaded bunkers allegedly caused the vessel's injector pumps and main engine to seize.

As confidence in Panama high-sulphur fuel oil quality returns and the number of Neopanamax vessels crossing the Canal grows, high-sulphur fuel oil monthly sales could surge again in 2019, before the January 2020 global regulation dramatically reduces demand. Panamanian suppliers source high-sulphur fuel oil bunkers from the US, Mexico, Peru, Ecuador, and Colombia, among others.

Marine gasoil (MGO) sales also peaked in March at 42,530t and dropped to 29,630t in November. There were no specification problems with MGO, but because some shipowners buy combined lots of high-sulphur fuel oil with MGO, demand for MGO dropped. Unlike sales of fuel oil for the year, MGO sales overall were up 19pc to 386,937t in the first 11 months of the year, compared with 324,915t during the same period in 2017.

Panama sources all of its MGO from the US. Panama imported 13.97mn bl (about 1.87mn t) of distillate from the US during the period January through September, up 17pc compared with the same period last year. Of this quantity, 88pc of the distillate contained up to 500ppm sulphur and the remaining fuel had sulphur in the range of 500-2,000ppm. In addition to bunkering, gasoil is sold for local power generation.