Higher bunker fuel prices in South Korea mute demand

Shipowners have been buying less bunker fuel in South Korea as prices there are higher compared with other regional port centres such as Singapore and China, where weak demand and oversupply respectively are depressing prices.

Prices for delivered very low-sulphur fuel oil (VLSFO) in South Korea have been commanding an average premium of $28/t to Singapore and Zhoushan prices so far this year, up from an average of $15/t and $13/t respectively last year.

South Korean prices are higher than those in Singapore, where weaker bunker demand has pushed down prices and delivered premiums to a record low. Oversupply of bunker inventories at Chinese ports because of rising domestic production and imports are also keeping Chinese prices low and more competitive than those in South Korea.

The lower prices in Singapore and China have prompted buyers to bunker there instead of in South Korea, according to various market sources.

There has been an uptick in demand at China's largest bunkering port of Zhoushan. Spot demand for VLSFO in Zhoushan rebounded to an average of about 3,500 t/d in March, after falling to an average of 2,700 t/d in February from 3,140 t/d in January.

By contrast, spot demand in South Korea has edged down by about 20-30pc from usual volumes, local traders said. No data are available to provide an indication of usual spot trading volumes in South Korea. "Demand seems to be pretty much gone in Korea these days, as buyers are increasingly comparing [prices] to China," a South Korean trader said.

Spot demand for bunkers in Japan has also been weak since the end of March for almost the same reasons. "Shipping activity in the entire region is slow, which shows not only in reduced spot market consumption but also in slowing term contract sales," a Japanese trader said.

Argus has reported a daily average of eight spot deals in Singapore and 1.5 in South Korea so far in April, down from 10 and 2.5 last month respectively.

By Sammy Six, Maiko Nakashima and Nick Mai