UPDATED: VLSFO at top 20 ports hits $987/ton, Singapore: $1,001, Fujairah: $1,024
The price of ship fuel was flirting with a new record even before Russia invaded Ukraine. Then war broke out, and the highs of the past were left far behind. Ship fuel costs have “gone parabolic,” said Braemar ACM Shipbroking
To the extent the fuel cost increase is passed along to the shippers of containerized goods and bulk commodities such as oil and grain, it will add to inflation. To the extent it’s not passed on, it will lower shipping’s bottom line
Ships consumed high sulfur fuel oil (HSFO) until the IMO 2020 environmental regulations went into force two years ago. Since Jan. 1, 2020, ships have been required to burn more expensive fuel with 0.5% sulfur content known as very low sulfur fuel oil (VLSFO). Ships equipped with exhaust-gas scrubbers can continue to burn HSFO, which has a sulfur content of 3.5%
According to Ship & Bunker, the average price of VLSFO at the world’s top 20 bunker (marine fuel) ports reached $987 per ton on Tuesday, up 84% year on year. In two of the top four ports — Singapore and Fujairah, United Arab Emirates — the price of VLSFO reached $1,001 and $1,024 per ton, respectively. These price levels are unprecedented
Chart: American Shipper based on data from Ship & Bunker
The previous average daily high for VLSFO at the top 20 ports — $693.50 per ton — was recorded by Ship & Bunker on Jan. 8, 2020, at the height of the IMO 2020 transition. Before that regulation came into effect, HSFO reached highs of $746 per ton in March 2012 and around $750 per ton in July 2008.
It’s not just the price of marine bunkers that’s rising: The spread between VLSFO and HSFO is also increasing, a particularly important development for tanker and dry bulk trades. On spot voyage deals, owners pay for fuel. Some ships have scrubbers and burn cheaper HSFO; the majority don’t and must use VLSFO.
As of Tuesday, Ship & Bunker put the average price of VLSFO at the top 20 ports at a $263-per-ton premium to HSFO. The last time the gap was that wide was in January 2020, during the IMO 2020 fuel transition.
The wider the spread, the greater the benefit to owners of ships with scrubbers.