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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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- Independent Power Producers Association of India
- TeaM Sual Corporation - Philippines
- Parry Sugars Refinery, India
- Ambuja Cements Ltd - India
- Alfred C Toepfer International GmbH - Germany
- Attock Cement Pakistan Limited
- Orica Australia Pty. Ltd.
- Coal and Oil Company - UAE
- Bharathi Cement Corporation - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- Coastal Gujarat Power Limited - India
- Marubeni Corporation - India
- Bayan Resources Tbk. - Indonesia
- Wilmar Investment Holdings
- Chettinad Cement Corporation Ltd - India
- Mercator Lines Limited - India
- Videocon Industries ltd - India
- Bangladesh Power Developement Board
- Global Coal Blending Company Limited - Australia
- Bukit Asam (Persero) Tbk - Indonesia
- Parliament of New Zealand
- Ind-Barath Power Infra Limited - India
- Tata Chemicals Ltd - India
- Indika Energy - Indonesia
- Kideco Jaya Agung - Indonesia
- Sindya Power Generating Company Private Ltd
- Central Java Power - Indonesia
- Indian Energy Exchange, India
- Price Waterhouse Coopers - Russia
- VISA Power Limited - India
- Kumho Petrochemical, South Korea
- Commonwealth Bank - Australia
- Cement Manufacturers Association - India
- Kapuas Tunggal Persada - Indonesia
- Bahari Cakrawala Sebuku - Indonesia
- Altura Mining Limited, Indonesia
- SN Aboitiz Power Inc, Philippines
- Meralco Power Generation, Philippines
- International Coal Ventures Pvt Ltd - India
- Sarangani Energy Corporation, Philippines
- Electricity Generating Authority of Thailand
- Goldman Sachs - Singapore
- Siam City Cement - Thailand
- Rio Tinto Coal - Australia
- Mercuria Energy - Indonesia
- Agrawal Coal Company - India
- GAC Shipping (India) Pvt Ltd
- Bhushan Steel Limited - India
- PowerSource Philippines DevCo
- Anglo American - United Kingdom
- Aditya Birla Group - India
- Pendopo Energi Batubara - Indonesia
- Riau Bara Harum - Indonesia
- Dalmia Cement Bharat India
- SMG Consultants - Indonesia
- Sojitz Corporation - Japan
- Singapore Mercantile Exchange
- Bhoruka Overseas - Indonesia
- Salva Resources Pvt Ltd - India
- Xindia Steels Limited - India
- Indian Oil Corporation Limited
- Rashtriya Ispat Nigam Limited - India
- Bulk Trading Sa - Switzerland
- Gujarat Electricity Regulatory Commission - India
- IEA Clean Coal Centre - UK
- Kalimantan Lumbung Energi - Indonesia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Kobexindo Tractors - Indoneisa
- Global Green Power PLC Corporation, Philippines
- Indonesian Coal Mining Association
- European Bulk Services B.V. - Netherlands
- Indogreen Group - Indonesia
- McConnell Dowell - Australia
- CIMB Investment Bank - Malaysia
- Karbindo Abesyapradhi - Indoneisa
- TNB Fuel Sdn Bhd - Malaysia
- Interocean Group of Companies - India
- The State Trading Corporation of India Ltd
- Cigading International Bulk Terminal - Indonesia
- Savvy Resources Ltd - HongKong
- Simpson Spence & Young - Indonesia
- Global Business Power Corporation, Philippines
- Bukit Baiduri Energy - Indonesia
- India Bulls Power Limited - India
- Jindal Steel & Power Ltd - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Holcim Trading Pte Ltd - Singapore
- Central Electricity Authority - India
- Port Waratah Coal Services - Australia
- Offshore Bulk Terminal Pte Ltd, Singapore
- Orica Mining Services - Indonesia
- Jaiprakash Power Ventures ltd
- Aboitiz Power Corporation - Philippines
- Metalloyd Limited - United Kingdom
- Lanco Infratech Ltd - India
- Georgia Ports Authority, United States
- Petrochimia International Co. Ltd.- Taiwan
- Jorong Barutama Greston.PT - Indonesia
- Vizag Seaport Private Limited - India
- Kaltim Prima Coal - Indonesia
- Planning Commission, India
- IHS Mccloskey Coal Group - USA
- Toyota Tsusho Corporation, Japan
- Medco Energi Mining Internasional
- Carbofer General Trading SA - India
- Ministry of Transport, Egypt
- Latin American Coal - Colombia
- Indo Tambangraya Megah - Indonesia
- Antam Resourcindo - Indonesia
- Binh Thuan Hamico - Vietnam
- Wood Mackenzie - Singapore
- Vedanta Resources Plc - India
- Gujarat Sidhee Cement - India
- New Zealand Coal & Carbon
- Makarim & Taira - Indonesia
- Billiton Holdings Pty Ltd - Australia
- Trasteel International SA, Italy
- Neyveli Lignite Corporation Ltd, - India
- Standard Chartered Bank - UAE
- Sakthi Sugars Limited - India
- Barasentosa Lestari - Indonesia
- Thiess Contractors Indonesia
- GMR Energy Limited - India
- Asmin Koalindo Tuhup - Indonesia
- GN Power Mariveles Coal Plant, Philippines
- Oldendorff Carriers - Singapore
- OPG Power Generation Pvt Ltd - India
- Mintek Dendrill Indonesia
- Romanian Commodities Exchange
- Malabar Cements Ltd - India
- Edison Trading Spa - Italy
- Sree Jayajothi Cements Limited - India
- Energy Development Corp, Philippines
- Karaikal Port Pvt Ltd - India
- Timah Investasi Mineral - Indoneisa
- GVK Power & Infra Limited - India
- Kepco SPC Power Corporation, Philippines
- Mjunction Services Limited - India
- PTC India Limited - India
- Electricity Authority, New Zealand
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Heidelberg Cement - Germany
- London Commodity Brokers - England
- Ministry of Finance - Indonesia
- Borneo Indobara - Indonesia
- LBH Netherlands Bv - Netherlands
- Grasim Industreis Ltd - India
- Posco Energy - South Korea
- Star Paper Mills Limited - India
- Iligan Light & Power Inc, Philippines
- Merrill Lynch Commodities Europe
- Minerals Council of Australia
- The Treasury - Australian Government
- Australian Commodity Traders Exchange
- Coalindo Energy - Indonesia
- Ministry of Mines - Canada
- Pipit Mutiara Jaya. PT, Indonesia
- Gujarat Mineral Development Corp Ltd - India
- Bhatia International Limited - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Miang Besar Coal Terminal - Indonesia
- Uttam Galva Steels Limited - India
- Essar Steel Hazira Ltd - India
- Semirara Mining and Power Corporation, Philippines
- AsiaOL BioFuels Corp., Philippines
- Krishnapatnam Port Company Ltd. - India
- The University of Queensland
- White Energy Company Limited
- Energy Link Ltd, New Zealand
- Larsen & Toubro Limited - India
- Samtan Co., Ltd - South Korea
- Vijayanagar Sugar Pvt Ltd - India
- Sical Logistics Limited - India
- Directorate General of MIneral and Coal - Indonesia
- ASAPP Information Group - India
- Chamber of Mines of South Africa
- Banpu Public Company Limited - Thailand
- Ceylon Electricity Board - Sri Lanka
- Semirara Mining Corp, Philippines
- Straits Asia Resources Limited - Singapore
- Economic Council, Georgia
- SMC Global Power, Philippines
- South Luzon Thermal Energy Corporation
- Formosa Plastics Group - Taiwan
- Kartika Selabumi Mining - Indonesia
- MS Steel International - UAE
- Thai Mozambique Logistica
- Tamil Nadu electricity Board
- Directorate Of Revenue Intelligence - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- PNOC Exploration Corporation - Philippines
- Eastern Energy - Thailand
- Maharashtra Electricity Regulatory Commission - India
- Siam City Cement PLC, Thailand
- Kohat Cement Company Ltd. - Pakistan
- Meenaskhi Energy Private Limited - India
- Maheswari Brothers Coal Limited - India
- Manunggal Multi Energi - Indonesia
- Leighton Contractors Pty Ltd - Australia
- Therma Luzon, Inc, Philippines
- Madhucon Powers Ltd - India
- ICICI Bank Limited - India
- Intertek Mineral Services - Indonesia
- PetroVietnam Power Coal Import and Supply Company
- Globalindo Alam Lestari - Indonesia
- Australian Coal Association
- Deloitte Consulting - India
- CNBM International Corporation - China
- Sinarmas Energy and Mining - Indonesia
- Eastern Coal Council - USA
- Petron Corporation, Philippines
- Africa Commodities Group - South Africa
- Baramulti Group, Indonesia
- Renaissance Capital - South Africa
- Power Finance Corporation Ltd., India
- Bukit Makmur.PT - Indonesia
- San Jose City I Power Corp, Philippines
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