Bunker shortages spreading across Asian ports

Several ports across Asia are coping with limited availability of high-sulphur fuel oil (HSFO) for bunkers, with price spreads relative to Singapore rising to record highs.

Fewer fuel oil arbitrage arrivals into Singapore during June and July caused the cargo market to strengthen to all-time highs, with delivered bunker premiums also sustaining record highs around $30/t since the second week of July. The physical tightness in Singapore led shipowners to bunker in neighbouring ports instead.

The increase in fuel demand at several bunker ports across Asia, as well as the reduction of loadings from Singapore, is seeing several ports experiencing shortages as well.

The tightness first spread to Hong Kong and China, as these ports are dependent on Singapore for most of their supplies. "Spot markets there are out of control", according to one buyer.

Premiums for HSFO in Hong Kong versus Singapore averaged $6/t during the first half of the year but rose to an all-time high of $62/t on 23 July, according to Argus data. The market in Hong Kong is especially tight, with no availability until after the first week of August.

Chinese ports are seeing similar price divergences with the spread between Singapore and Zhoushan, the country's largest bunker hub, averaging $58/t this week. "Only one or two suppliers hold cargoes and they are reluctant to sell", according to one trader.

South Korea's western ports are also affected with unstable availability and barge schedules. Purchasing prompt bunker fuels should still be possible in Busan, the country's main bunker port.

"Both customers and traders these days need to consider availability carefully and not just check price trends. I am struggling with guiding my customers regarding good dates to order their bunkers", according to one South Korean trader.

The market tightness has also engulfed the Japanese market, with bunker supplies for prompt delivery hard to come by in Tokyo.

The situation is likely to persist as an influx of cargo supplies is unlikely before the end of August at the earliest, with uncertainty lingering as to where these supplies will come from.

"The market is massively backwardated with only three to four months left to destock HSFO so why bother. Better to just bunker low-sulphur fuel oil already and go early", according to one buyer.

Another buyer said that "the switch-over is experiencing a supply push, at least in those ports that are dependent on Singapore".

Demand for 0.5pc LSFO has in recent weeks picked up in Singapore, especially from large-scale operators, with only five months left before the International Maritime Organisation's sulphur cap on marine fuels coming into effect on 1 January 2020.