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Saturday, 22 February 20
THE SURPRISING MOVE IN MARINE FUEL SPREADS - ING
Middle distillates tank
One of the biggest surprises since the implementation of new International Maritime Organization (IMO) sulphur regulations is the weakness we have seen in the middle distillate market. Expectations were that we would see a large share of the shipping industry shift to marine gasoil, which would be a bullish scenario for middle distillate cracks. Instead, gasoil cracks are trading at levels last seen in 2017, falling by more than 50% from their October 2019 highs. A milder than usual winter, and the outbreak of the COVID-19 virus are just two factors adding further pressure on middle distillates.
However, from a shipping perspective, one of the key reasons why we have not seen strength in the market is the fact that demand for very low sulphur fuel oil (VLSFO) has been stronger than expected. As a result, the pick-up in marine gasoil demand has not been as much as anticipated. This has happened despite several reports of off-spec VLSFO. There also appears to be an element of hesitancy to more towards marine gasoil, with concerns over viscosity. This is evident in Asia, where we have seen VLSFO actually trading at a premium to marine gasoil.
Fuel oil cracks rally
While we have seen weakness in middle of the barrel products, fuel oil has strengthened, defying market expectations. The prompt crack in NW Europe has traded from around a US$30/bbl discount late last year to less than a US$15/bbl discount currently. There are several reasons behind this strength.
Firstly, refiners would have made any adjustments they could, be it through refinery upgrades, or adjusting feedstock accordingly to minimise HSFO yields as we moved into 2020.
Secondly, there has been increased interest from US refiners to process HSFO and, looking at fuel oil imports into the US over the last few months, particularly towards the end of 2019, volumes did increase. This move does also appear to reflect the limited availability of heavier crude grades for refiners in the US Gulf, given US sanctions against Venezuela.
Thirdly, and this certainly shouldn’t come as too much of a surprise, we see more ships with scrubbers installed coming online. This would provide some additional support to the demand picture for HSFO. The coronavirus could even have an impact here, with a potential delay in scrubber installations.
Finally, a factor which was more of a risk than a reality was the potential for the US not to extend waivers which allow Iraq to import natural gas and electricity from Iran. If this were to happen, it would likely mean that Iraqi domestic fuel oil consumption would increase for power generation needs, so reducing export availability of fuel oil from the country. The risk of this happening has eased, however, with the US recently extending waivers by another 45 days.
China VLSFO supply set to rise
The VLSFO market was performing well until news that China would provide tax waivers to refiners in the country for lower sulphur fuel oil production, which has set the path for VLSFO output in China to grow. Already there are reports that PetroChina has delivered volumes of VLSFO into bonded storage, where it will likely be retailed to ships. The idea is that China wants to build its capabilities as a bunkering hub, rather than wholesale exports of VLSFO.
What has this all meant for spreads?
The above dynamics have had an impact on marine fuel spreads. The more bearish environment we have seen in the middle distillate market, along with a more constructive HSFO market, has meant that the spot NW Europe gasoil-HSFO spread has narrowed from around US$400/t at certain stages last year to around US$235/t currently. Meanwhile, pressure from potential Chinese VLSFO supply has had a similar impact on the spot VLSFO-HSFO spread, with it falling from a high of US$290/t late last year to around US$165/t currently. Obviously, these narrower spreads increase the payback period for a scrubber, making the economics of an installation not as attractive as it looked last year.
As we see more scrubber fitted ships coming online, it will increasingly eat into the advantage of burning HSFO. Therefore, we believe the spreads are unlikely to trade back out to the highs seen last year.
Source: ING
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Monday, 24 February 20
CHINA SAYS MAJOR COAL FIRMS RESTORE 95% OF PRODUCTION CAPACITY - REUTERS
China’s coal companies controlled by the central government have resumed operations and are back at more than 95% of their capacity, an offic ...
Sunday, 23 February 20
SHIPPING INDUSTRY FACES $370 MILLION HIT FROM NEW PANAMA CANAL CHARGE - REUTERS
A new “freshwater” charge that came in this month to help the Panama Canal cope with climate change will cost the shipping industry up ...
Sunday, 23 February 20
A 57,000DWT SHIP FIXING DELIVERY SOUTH KALIMANTAN TRIP, REDELIVERY CJK, AT $7,600 - BALTIC BRIEFING
Capesize
The Capesize market found little to cheer about this week as it again endured remarkable lows. The Atlantic continued to improve, with ...
Friday, 21 February 20
CAPE: AVERAGE NOMINAL DAILY EARNINGS STILL ADMITTEDLY UNCHANGED W-O-W AT BELOW US$3000 - FEARNLEYS
CAPE
The worst may just about be over for the big ships. Average nominal daily earnings still admittedly unchanged w-o-w at below US$3k, but sent ...
Friday, 21 February 20
INDIA: POTENTIAL INVESTORS SEEK MORE CLARITY ON COMMERCIAL COAL MINING NORMS - FINANCIAL EXPRESS
Potential private investors have sought more clarity on the pricing mechanism proposed for the much-anticipated auction for commercial coal mining. ...
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- Salva Resources Pvt Ltd - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Sree Jayajothi Cements Limited - India
- Bhatia International Limited - India
- Electricity Generating Authority of Thailand
- Jorong Barutama Greston.PT - Indonesia
- Global Green Power PLC Corporation, Philippines
- Ceylon Electricity Board - Sri Lanka
- Gujarat Electricity Regulatory Commission - India
- Global Coal Blending Company Limited - Australia
- Orica Australia Pty. Ltd.
- GMR Energy Limited - India
- Bukit Asam (Persero) Tbk - Indonesia
- Barasentosa Lestari - Indonesia
- Georgia Ports Authority, United States
- Jaiprakash Power Ventures ltd
- Intertek Mineral Services - Indonesia
- Carbofer General Trading SA - India
- Medco Energi Mining Internasional
- Kalimantan Lumbung Energi - Indonesia
- Videocon Industries ltd - India
- Uttam Galva Steels Limited - India
- Grasim Industreis Ltd - India
- Economic Council, Georgia
- Mjunction Services Limited - India
- Vizag Seaport Private Limited - India
- Cigading International Bulk Terminal - Indonesia
- Kobexindo Tractors - Indoneisa
- The Treasury - Australian Government
- Orica Mining Services - Indonesia
- Power Finance Corporation Ltd., India
- Banpu Public Company Limited - Thailand
- Indo Tambangraya Megah - Indonesia
- PetroVietnam Power Coal Import and Supply Company
- Makarim & Taira - Indonesia
- Dalmia Cement Bharat India
- Altura Mining Limited, Indonesia
- Commonwealth Bank - Australia
- Bank of Tokyo Mitsubishi UFJ Ltd
- Parry Sugars Refinery, India
- TeaM Sual Corporation - Philippines
- CNBM International Corporation - China
- Simpson Spence & Young - Indonesia
- Oldendorff Carriers - Singapore
- Chamber of Mines of South Africa
- Gujarat Sidhee Cement - India
- Singapore Mercantile Exchange
- Larsen & Toubro Limited - India
- Kumho Petrochemical, South Korea
- Romanian Commodities Exchange
- White Energy Company Limited
- Tamil Nadu electricity Board
- Kohat Cement Company Ltd. - Pakistan
- Bahari Cakrawala Sebuku - Indonesia
- Aboitiz Power Corporation - Philippines
- Binh Thuan Hamico - Vietnam
- Mintek Dendrill Indonesia
- Semirara Mining and Power Corporation, Philippines
- Mercuria Energy - Indonesia
- SMG Consultants - Indonesia
- Posco Energy - South Korea
- Merrill Lynch Commodities Europe
- Jindal Steel & Power Ltd - India
- Bhoruka Overseas - Indonesia
- Agrawal Coal Company - India
- Bhushan Steel Limited - India
- Globalindo Alam Lestari - Indonesia
- Alfred C Toepfer International GmbH - Germany
- Offshore Bulk Terminal Pte Ltd, Singapore
- Kepco SPC Power Corporation, Philippines
- Eastern Energy - Thailand
- Wilmar Investment Holdings
- Edison Trading Spa - Italy
- Directorate General of MIneral and Coal - Indonesia
- Mercator Lines Limited - India
- New Zealand Coal & Carbon
- Planning Commission, India
- Karbindo Abesyapradhi - Indoneisa
- Maharashtra Electricity Regulatory Commission - India
- Essar Steel Hazira Ltd - India
- PowerSource Philippines DevCo
- Coastal Gujarat Power Limited - India
- Australian Coal Association
- IHS Mccloskey Coal Group - USA
- Attock Cement Pakistan Limited
- South Luzon Thermal Energy Corporation
- The University of Queensland
- Thai Mozambique Logistica
- Coalindo Energy - Indonesia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Krishnapatnam Port Company Ltd. - India
- SN Aboitiz Power Inc, Philippines
- McConnell Dowell - Australia
- Manunggal Multi Energi - Indonesia
- Formosa Plastics Group - Taiwan
- Neyveli Lignite Corporation Ltd, - India
- Kapuas Tunggal Persada - Indonesia
- Parliament of New Zealand
- Energy Development Corp, Philippines
- Baramulti Group, Indonesia
- London Commodity Brokers - England
- Marubeni Corporation - India
- Sakthi Sugars Limited - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Riau Bara Harum - Indonesia
- Rio Tinto Coal - Australia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- PNOC Exploration Corporation - Philippines
- Standard Chartered Bank - UAE
- Iligan Light & Power Inc, Philippines
- Sarangani Energy Corporation, Philippines
- Central Electricity Authority - India
- Latin American Coal - Colombia
- OPG Power Generation Pvt Ltd - India
- GN Power Mariveles Coal Plant, Philippines
- Antam Resourcindo - Indonesia
- PTC India Limited - India
- Goldman Sachs - Singapore
- Rashtriya Ispat Nigam Limited - India
- ICICI Bank Limited - India
- TNB Fuel Sdn Bhd - Malaysia
- Global Business Power Corporation, Philippines
- Straits Asia Resources Limited - Singapore
- Toyota Tsusho Corporation, Japan
- Deloitte Consulting - India
- Indian Energy Exchange, India
- Miang Besar Coal Terminal - Indonesia
- Therma Luzon, Inc, Philippines
- Cement Manufacturers Association - India
- Star Paper Mills Limited - India
- Directorate Of Revenue Intelligence - India
- International Coal Ventures Pvt Ltd - India
- Siam City Cement PLC, Thailand
- Kideco Jaya Agung - Indonesia
- Indian Oil Corporation Limited
- Sojitz Corporation - Japan
- Minerals Council of Australia
- Renaissance Capital - South Africa
- Ministry of Transport, Egypt
- The State Trading Corporation of India Ltd
- Chettinad Cement Corporation Ltd - India
- Australian Commodity Traders Exchange
- Meralco Power Generation, Philippines
- Sindya Power Generating Company Private Ltd
- Bulk Trading Sa - Switzerland
- CIMB Investment Bank - Malaysia
- IEA Clean Coal Centre - UK
- European Bulk Services B.V. - Netherlands
- GVK Power & Infra Limited - India
- India Bulls Power Limited - India
- Lanco Infratech Ltd - India
- Asmin Koalindo Tuhup - Indonesia
- Semirara Mining Corp, Philippines
- Eastern Coal Council - USA
- Electricity Authority, New Zealand
- Holcim Trading Pte Ltd - Singapore
- Thiess Contractors Indonesia
- Pendopo Energi Batubara - Indonesia
- Kaltim Prima Coal - Indonesia
- Ind-Barath Power Infra Limited - India
- ASAPP Information Group - India
- Central Java Power - Indonesia
- Timah Investasi Mineral - Indoneisa
- Xindia Steels Limited - India
- Siam City Cement - Thailand
- Madhucon Powers Ltd - India
- Coal and Oil Company - UAE
- Bukit Baiduri Energy - Indonesia
- Ministry of Finance - Indonesia
- Bangladesh Power Developement Board
- Sinarmas Energy and Mining - Indonesia
- Tata Chemicals Ltd - India
- Kartika Selabumi Mining - Indonesia
- Leighton Contractors Pty Ltd - Australia
- Africa Commodities Group - South Africa
- Price Waterhouse Coopers - Russia
- San Jose City I Power Corp, Philippines
- Energy Link Ltd, New Zealand
- Samtan Co., Ltd - South Korea
- Ambuja Cements Ltd - India
- Metalloyd Limited - United Kingdom
- Indonesian Coal Mining Association
- Meenaskhi Energy Private Limited - India
- Port Waratah Coal Services - Australia
- LBH Netherlands Bv - Netherlands
- Petron Corporation, Philippines
- Pipit Mutiara Jaya. PT, Indonesia
- Vedanta Resources Plc - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- VISA Power Limited - India
- Heidelberg Cement - Germany
- Anglo American - United Kingdom
- Wood Mackenzie - Singapore
- Sical Logistics Limited - India
- Gujarat Mineral Development Corp Ltd - India
- Billiton Holdings Pty Ltd - Australia
- Bukit Makmur.PT - Indonesia
- Ministry of Mines - Canada
- Karaikal Port Pvt Ltd - India
- Trasteel International SA, Italy
- MS Steel International - UAE
- Independent Power Producers Association of India
- Bharathi Cement Corporation - India
- GAC Shipping (India) Pvt Ltd
- Malabar Cements Ltd - India
- SMC Global Power, Philippines
- Savvy Resources Ltd - HongKong
- Maheswari Brothers Coal Limited - India
- Indika Energy - Indonesia
- Aditya Birla Group - India
- AsiaOL BioFuels Corp., Philippines
- Bayan Resources Tbk. - Indonesia
- Vijayanagar Sugar Pvt Ltd - India
- Borneo Indobara - Indonesia
- Indogreen Group - Indonesia
- Petrochimia International Co. Ltd.- Taiwan
- Interocean Group of Companies - India
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