The price of low sulphur fuel oil has dropped steeply in recent weeks at the bunkering hub of Singapore in a sign that the bunker market is stabilizing following the implementation of IMO 2020 sulphur cap, according to BIMCO.
Prices of low sulphur fuel rose in December as shipowners transitioned to the IMO2020 compliant fuel, causing the VLSFO and High-sulphur fuel oil (HSFO) spread to reach record breaking levels.
In Singapore, the price of Very Low Sulphur Fuel Oil (VLSFO) peaked on 7 January 2020 at $740 per metric tonne (MT), but dropped $99 to $641 per MT on 22 January, BIMCO said in an emailed update. The VLSFO-HSFO spread has also narrowed, shrinking 19% to $284 per MT over the same time period.
While Singapore has seen one of the largest drops in the prices of VLSFO, prices has also fallen in other ports around the world.
“The initial uptick in low-sulphur fuel oil prices marked the first wave of IMO2020, whereas the price levels are now declining towards a point of stabilization,” BIMCO stated.
“Even given the recent narrowing of the spread, shipping companies are still faced with a massive uptick in fuel oil costs, which is set to affect operating margins in the upcoming quarters, as many companies have little leeway to pass on the additional costs to their customers.
“Despite the lower spread, the investment payback period for a scrubber is between half a year to one and a half years, depending on the cost of the scrubber and daily consumption, which allows for substantial fuel oil cost savings for scrubber-fitted ships,” BIMCO said.