The unfold between very-low sulphur gas oil (VLSFO) and high-sulphur gas oil (HSFO) has widened following Russia’s invasion of Ukraine. The HSFO worth, nonetheless, might rise if Russian volumes coming into the market begin declining resulting from sanctions.
Late 2016, the Maritime Setting Safety Committee (MEPC) of the Worldwide Maritime Group (IMO) agreed to scale back the allowed sulphur content material in bunker gas used exterior Emissions Management Areas (ECA) from 3.50% m/m to 0.50% m/m. Ships that also use HSFO should set up a so-called scrubber to realize an equal discount in SOx emissions and thereby adjust to the sulphur regulation which entered into pressure on 1 January 2020.
“At present, 12% of the mixed bulk, container, and tanker fleet has a scrubber put in. Nearly all of ships are subsequently nonetheless depending on low-sulphur fuels and their price competitiveness is influenced by the price unfold between VLSFO and HSFO,” says Niels Rasmussen, Chief Delivery Analyst at BIMCO
Crude tankers and container ships have the very best scrubber set up price at 29% and 17% respectively, with bulk carriers at 12% and solely 5% for product tankers.
After bottoming out in late October 2020 at USD 40/tonne the price premium for VLSFO has since elevated, settling at round USD 150-160/tonne in late 2021.
“Since Russia’s invasion of Ukraine, the unfold has once more elevated and now seems to have settled round USD 200/tonne. In proportion phrases the VLSFO premium remains to be round 30%, nonetheless, in absolute phrases it interprets right into a saving for ships with a scrubber put in of USD 2,000/day for each 10 tonnes of bunker gas consumed,” says Rasmussen and provides:
“If this premium continues, charterers’ willingness to pay a premium for ships with a scrubber put in will certainly improve accordingly.”
Some analysts are within the meantime predicting that HSFO could quickly observe VLSFO upwards if the volumes of Russian HSFO coming to market cut back by sanctioning (whether or not self-sanctioning or authorities sanctions).
Supply: BIMCO, By Niels Rasmussen, Chief Delivery Analyst