The sale of low sulphur fuel skyrocketed at the world’s largest bunkering hub of Singapore ahead of the IMO 2020 Sulphur Cap deadline, BIMCO said in its first analysis of the switch.
According to BIMCO, preliminary estimates compiled by the Maritime and Port Authority of Singapore indicate that a total of 4.4 million tonnes of bunker fuel were sold in December 2019, with IMO-compliant low sulphur fuels, such as LSFO and MGO LS, making up the majority sales with 3.1 million tonnes sold, representing about 70%.
This compares to the start of 2019 when low sulphur fuel accounted for just 8% of Singapore’s total bunker fuels sales. The figure also represents 51 percent month-on-month increase in December, showing shipowners’ “last minute” transition to using the new fuel, according to BIMCO.
LFSO made up the bulk of low sulphur fuel sales, totaling 2.6 million tonnes representing 59% of total low sulphur fuel sales in December.
Meanwhile, the sale of high-sulphur fuel oil dropped tremendously in a matter of months as the industry transitioned to the new regulations, falling to just 1.27 million tonnes in December for 28% market share. BIMCO noted that continued demand for HFSO is being driven primarily by ships fitted with exhaust gas cleaning systems, aka scrubbers.
“The shipping industry has been riddled with market uncertainty in recent months, but the bunker sales in the port of Singapore provide one of the first readings as to how the industry has transitioned into compliance with the IMO2020 regulation. We have now surpassed the first wave of IMO2020 and hopefully the accompanying market uncertainty will diminish as we proceed into 2020,” says BIMCO’s Chief Shipping Analyst, Peter Sand.
Looking at the low-sulphur to high-sulphur fuel spread, BIMCO said the near record breaking spread between the fuels seen around the IMO deadline has narrowed slightly in the first two weeks of the year possibly indicating that the global fleet has “bunkered sufficiently” for the initial phase of the transition.
Nevertheless, the rising cost of low sulphur fuels will be a challenge for shipowners who did not go the scrubber route, considering fuel oil costs effectively doubled overnight.
“Almost from one day to another, IMO2020 has resulted in a massive increase in bunkering costs for shipowners and operators, costs which for many companies cannot be sustained for a prolonged period. Shipowners are trying to pass on the additional costs of bunkering to customers, but if the underlying supply and demand fundamentals are not balanced, their efforts may prove futile,” says Peter Sand.