INDUSTRIAL NEWS-WEEK 40

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SINGAPORE BUNKERING HUB READY FOR IMO 2020, EXPANDS LNG BUNKERING GROUP – MINISTER

Singapore authorities are taking measures to ensure the availability of low- sulphur marine fuels ahead of upcoming emissions regulations in 2020, Singapore’s Senior Minister of State for Transport and Health Lam Pin Min said on Wednesday.

“(The) MPA is working closely with the industry to ensure that Singapore is ready to supply low-sulphur compliant fuels ahead of 1 January, 2020,” said Lam at the Singapore International Bunkering Conference and Exhibition.

The Maritime and Port Authority of Singapore (MPA) will make available a list of licensed bunker suppliers of low-sulphur fuels by mid-2019, said Lam.

Singapore is the world’s largest marine refuelling, or bunkering, hub.

The International Maritime Organization (IMO) is introducing new rules on marine fuels from 2020, limiting the sulphur content to 0.5 percent, from 3.5 percent currently, to curb pollution produced by the world’s ships.

Singapore is also continuing to promote the use of cleaner-burning liquefied natural gas (LNG) as a marine fuel, also called bunkers, at home and abroad.

The MPA also announced on Wednesday that the Suez Canal Economic Zone Authority has joined the LNG Bunkering Port Focus Group, the first Middle Eastern port to do so, in an effort to strengthen LNG-bunkering capabilities across key global ports.

“The growing membership will strengthen the global network of LNG bunkering facilities and give shipping lines more confidence to invest in LNG-fuelled vessels,” said Lam.

The working group was first formed by port authorities in Singapore, Belgium and the Netherlands in 2014 and is now comprised of 12 ports across Asia, the Middle East, Europe and North America.

Using LNG to power ships instead of fuel oil or marine gasoil can reduce emissions of the pollutants nitrogen oxide and sulphur oxide by 90 percent to 95 percent.

Singapore had record bunker fuel sales in 2017 of 50.6 million tonnes.

BUNKER FUEL SALES ON CONTRACT BASIS TO RISE APPROACHING 2020

Bunker fuel volumes sold on a contract basis rather than on the spot market are expected to increase as the market’s focus remains firmly on the approaching tighter sulfur regulations.

As the International Maritime Organizations Maritime Organization’s global bunker sulfur limit drops to 0.5% from 3.5% at the start of 2020, bunker fuel buyers will be looking to try and guarantee supply of their chosen compliant fuel.

Many bunker market participants are already seeing a shift towards more volume being bought on a contract basis rather than on the spot market.

“[There is] less activity worldwide on the spot market,” one bunker buyer said. “There is no change in the volume being [sold]. However, many [participants] are moving more on to contract.”

Larger ports with a lot of vessel traffic, and often much larger sale volumes, see a higher proportion of contract sales compared to the smaller ports which often have a dominance of spot market sales, sources said.

“Piraeus generally [sees] more on contract compared to Istanbul…Piraeus is a bigger port so it is logical to have more contracts there,” a trader in both the East Mediterranean ports said.

While one of the main reasons for the current movement towards contracts is buyers trying to build longer-term relationships with the supplier in preparation for a reliable supply of compatible and compliant bunker fuel, there are other factors coming into play.

One of these other factors is suppliers looking for a guaranteed outlet for their product, particularly 3.5% sulfur fuel oil.

As residual fuel oil is not one of the money-making products to come out of the refinery, suppliers are very keen to make sure they are selling all of the product produced month after month to ensure that it is not taking up too much storage space, a buyer said.

Another factor behind the increase in contract buying is the fact that many market participants are fearful of how high prices are going to rise on the back of the bullish crude complex and want to lock in prices, a second buyer said.

A physical supplier in the bunkering hub of Rotterdam however disagreed with this.

“If they lock in product it is not on a fixed price basis…more [on a] floating [basis],” the supplier said.

While contracts may work for many players in the market, they can be very complicated to develop.

It is not easy to lock in prices and often it can tricky to find a pricing structure that works for both the supplier and the buyer, said a trader in the African bunker market.

IMO 2020

The key driver behind the expected increase in volumes sold on a contract basis rather than on a spot basis is the tighter global sulfur limit of 0.5% which comes into force on January 1, 2020.

While the movement from spot to contract has already been noted by many players in the bunker market, the big switch in preparation for 2020 is not expected to occur until towards the end of 2019.

“Once [we hit] Q3 2019 people will look towards the contracts,” a third buyer said, noting that many majors are not coming out with new contracts at the moment due to recent financial instability scares in the market.

Aegean’s financial situation in the first half of 2018 and the recent consolidation of Bomin Group’s physical supply presence has resulted in some hesitancy in the market.

Compatibility concerns surround the many variations of 0.5% sulfur bunker fuels that will likely be available and uncertainty over where — and even how much — 3.5% sulfur bunker fuel will be available for those vessels with scrubbers.

“The [3.5% bunker fuel] market in Rotterdam will tighten up again,” the third buyer said.

These concerns mean that many buyers will be looking to contracts in order to either receive a supply of compatible 0.5% fuel or guarantee availability of 3.5% fuel oil.

“Owners would like to have the guarantee of a good product with a good and reliable supply so they choose a more long-term relationship,” the physical supplier said. Buyers in the industry see the market being heavily supplier-oriented for 0.5% as many participants are looking at this fuel as their likely solution to the tightening sulfur cap and receiving compatible batches of the fuel will be their priority.

Moving towards 2020 and onwards, “0.5% fuel will be a branded market [with] limited availability on the spot market,” the third buyer added.

Global producers ExxonMobil and Shell announced Wednesday the majority of their supply locations for their 0.5% sulfur marine fuels, with ExxonMobil going one step further and confirming that their fuels across the supply locations would be compatible with each other.

The bunker market now awaits news from other big players regarding their supply plans for 2020.

BULK CARRIER ROBBED WHILE ANCHORED AT MUARA BERAU, INDONESIA

In its weekly report for 25 September – 1 October, ReCAAP ISC informed of one actual incident of armed robbery against ships, involving the Barbados-flagged bulk carrier, while anchored at Muara Berau Anchorage, Indonesia.

While at anchor, about four or five perpetrators armed with knives boarded the ship twice within three hours. The perpetrators climbed the ship through the anchor chain from a small boat.

The duty watchman noticed that the perpetrators were on the forecastle deck on both occasions. He raised the alarm, mustered the crew, and reported incident to the port control. Eventually, the perpetrators escaped with stores stolen form the forecastle store. There were no injuries.

The location of the incident is shown here below:

The ReCAAP ISC urges ship master and crew to report all incidents of piracy and armed robbery against ships to the nearest coastal State and flag State, exercise vigilance and adopt relevant preventive measures taking reference from the Regional Guide to Counter Piracy and Armed Robbery Against Ships in Asia.

Meanwhile, as the threat of abduction of crew in the Sulu-Celebes Seas and off eastern Sabah remains, ReCAAP ISC maintains its advisory issued via the ReCAAP ISC Incident Alert dated 21 November 2016 to all ships to reroute from the area, where possible. Otherwise, ship masters and crew are strongly urged to exercise extra vigilance while transiting the Sulu-Celebes Seas and eastern Sabah region.

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