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Global Bunker Fuel Market Overview

Global bunker fuel demand is over 400 million tons annually and is expected to exceed 500 million tons by 2020. Ships consume over 4 million barrels of oil per day, accounting for around 4% of global oil demand. The bunker fuel market was valued at $137.2 billion in 2017 and is expected to reach $273.1 billion by 2025, growing at a compound annual growth rate of 9.4% during that time period. Residual fuel currently has the largest market share at 60% due to its lower price compared to marine gas oil, though MGO demand is projected to grow the fastest over the next several years due to new environmental regulations. The top five bunkering ports, including Singapore, Fuj

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56 views12 pages

Global Bunker Fuel Market Overview

Global bunker fuel demand is over 400 million tons annually and is expected to exceed 500 million tons by 2020. Ships consume over 4 million barrels of oil per day, accounting for around 4% of global oil demand. The bunker fuel market was valued at $137.2 billion in 2017 and is expected to reach $273.1 billion by 2025, growing at a compound annual growth rate of 9.4% during that time period. Residual fuel currently has the largest market share at 60% due to its lower price compared to marine gas oil, though MGO demand is projected to grow the fastest over the next several years due to new environmental regulations. The top five bunkering ports, including Singapore, Fuj

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ybhattacharya9
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© © All Rights Reserved
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Chapter 2:

Global Bunker Fuel Market Overview

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Chapter 2: Global Bunker Fuel Market Overview

s Ships move more than 80% of global trade (volume) - 70% by value
s Account for about 4% of global oil demand (4.3 mb/day - IEA)
s Around 3.4 mb/d for HFO while the remaining 800 kb/d is for MGO
s Total annual global marine fuel demand is in excess of 400 million tons, Projected 2020
demand exceeding 500 million tons
s Large container ships account for about 20% of all fuel demand
s Fuel represents 50–70% of total running costs for a ship
s Global bunker fuel market valued at $137.2 Billion in 2017; expected to reach $273.1
Billion by 2025, (CAGR of 9.4% from 2018-25)
s Residual fuel segment was the largest in 2017, with a 60% market share and will maintain
its dominance through 2025 as it is cheaper
s MGO segment would witness the fastest CAGR of 14.5% from 2018 to 2025. This is due
to new IMO environmental regulations
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Chapter 2: Global Bunker Fuel Market Overview

The Maritime Industry


s Global seaborne trade expanding at 4%, fastest growth in five years
s Total volumes in 2017 reached 10.7 billion tons, reflecting an additional 411 MMT,
nearly half of which were made of dry bulk commodities
s Projected increase of 4% in 2018 and exceed 12bn tonnes in 2019
s Jan 2018, world commercial fleet consisted of 94,171 vessels, with a combined
tonnage of 1.92 billion dwt
s Dwt grew by 3.31 per cent in 2017
s Compared with the demand growth of 4.0% in 2017, lower level of growth in supply
helped improve market fundamentals - improved freight rates
s Dry Bulk carriers – 42.55%, Oil Tankers - 29.16%, Container – 13.14%

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Chapter 2: Global Bunker Fuel Market Overview

Background of Bunker Trading and Players


s Until 1973, bunker costs were a small part of ship operations
s Bunkers supplied by producers to the end users with virtually no intermediary and at
prices not much above delivery cost
s Practically no credit risk; defaults on payments was not significant
s Changed almost overnight with first OPEC oil crisis of 1973 causing huge increases
in crude and product prices, resulting in two developments
s First, opportunity for a market to develop as fuel oil now had a value, the other,
appearance of credit risk in the bunker market
s Oil majors which were direct suppliers, found themselves carrying millions of dollars
of credit risk
s They were happy to spread that risk by passing it to intermediaries

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Chapter 2: Global Bunker Fuel Market Overview

 The 70’s saw first-time independent traders entering the market.


 Oil crisis provided sufficient margins to make international trading of bunkers a
commercially attractive proposition. Early examples:
• Tramp Oil and Marine in 1975 (now World Fuel Services Inc.)
• Cockett Marine Oil in 1979 by Neil Cockett
• Chemoil, founded by Robert Chandran in 1981
 Today thousands of bunker traders and suppliers worldwide. Generally speaking, there
are five basic tiers in the market:
s Major oil companies (Shell, Chevron, ExxonMobil, BP, etc.)
s Large independent traders (World Fuel Services, Chemoil, Aegean etc)
s Medium-sized independents (Peninsula Petroleum, Praxis Energy etc.)
s Smaller independents (Ocean Energy, Searights and many others)
s National oil companies, such as IOC, Petrobras Bunkering of Brazil, etc 5
Chapter 2: Global Bunker Fuel Market Overview

The Bunker Supply Chain – possible buying structures


s Refiner ► Ship
s Refiner ► Supplier ► Ship
s Refiner ► Trader ► Supplier ► Ship
s Refiner ► Trader ► Broker ► Trader ► Broker ► Supplier ► Ship
• Between refiner and ship, there are potentially a number of intermediaries. Bunker
traders buy fuel oil from the producers and sell it on to end users.
• Traders may or may not have the direct physical capacity to deliver fuel to ships in
port. If they do not, they will appoint local physical suppliers.
• The real credit risk in a bunker transaction always lies between seller and buyer and the
broker is not a significant feature in this process

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Chapter 2: Global Bunker Fuel Market Overview

s Sector is heavily influenced by the location of the world’s main bunkering ports
s Typically located along high-density shipping lanes, but also close to populated areas
where there is high demand for transported goods.
s Also found close to refineries, which are looking to ensure a constant supply of fuel
s Approximately 400 major bunkering ports in the world
s Most of the demand is concentrated in a few strategic ports
s Asia-Pacific is the global leader in the global bunker fuel market
s Five ports - Singapore, Fujairah, Rotterdam, Hongkong and Gibraltar account for
nearly half of all bunker sales worldwide.

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Chapter 2: Global Bunker Fuel Market Overview

Fuel Consumption by Ships – A historical perspective


o Bunkers single most important item in voyage costs (for 50 - 70% )
o Early 1970’s, oil prices were low, less attention was paid to fuel costs
o Rising oil prices during the ‘70s saw the whole balance of costs change
o During the period 1970–85, fuel prices increased by 950%
o If fuel accounted for about 13% of total ship costs in 1970, by 1985 it had increased to
34%, more than any other individual item
o 1986 bunker prices fell and level of interest in ship design reduced
o In 2000, bunker prices started to increase again and the importance of fuel costs
increased
o Apart from design, ship owners resorted to slow steaming and extra slow steaming

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Chapter 2: Global Bunker Fuel Market Overview

• Highest consumption on container ships


• Fuel consumption by a containership is mostly a function of ship size and cruising speed,
which follows an exponential function above 14 knots
• A containership of around 8,000 TEU would consume about 225 tons of bunker fuel per
day at 24 knots
• At 21 knots consumption drops to about 150 tons per day, a 33% decline
• Balance between speed and voyage times and frequency
 Normal (20-25 knots)
 Slow steaming (18-20 knots)
 Extra slow steaming (15-18 knots) - super slow steaming/economical speed.
 Minimal cost (12-15 knots); 22.2 – 27.8 km/hr). The lowest speed technically
possible - commercially unacceptable
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Chapter 2: Global Bunker Fuel Market Overview

Bunkering Industry in India


σ Indian coastline of 7,517 kms with app. 27000 vessels calls annually
σ Seaborne trade growing at more than 7% - no growth in bunkering demand
σ Supplies dominated by neighbouring ports such as Fujairah, Singapore
σ Bunker Fuels demand at Indian ports is just about 1% of global demand
σ Majority of India’s bunkering sales is to coastal vessels, which is duty paid
σ Total annual FO sales in 2018 - 702,600 MT and DO - 678,500 MT
σ Total sales of 1.386 MMT is 6% lower than the figure for 2017 (1.475 MMT)

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Chapter 2: Global Bunker Fuel Market Overview

Roadblocks:
• Pre GST, bunkers to foreign ships was deemed as exports
• GST – reduced from 18% to 5%, still makes fuel about $17/mt costlier
• Volumes falling by over 20% a month
• Ports such as Colombo and Trincomalee in Sri Lanka benefit

• Storage tanks (heated) – 2,500 Kl to 7,500 Kl


• Pipeline network from refinery
• Dedicated bunkering jetty (preferably in Minor port nearby)
• Coastal Tank barges – (1500T – 2000T DWT) 11
Chapter Ends !!!

Questions???

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