【Ferro-alloys.com】Bunker supply in China's Zhoushan -- the country's biggest bunkering port -- is expected to tighten in the second quarter, due to unfavourable market dynamics and uneconomic pricing to bring in cargoes from Singapore, market sources said March 24.

China's bunker sales have grown rapidly amid competitive prices. China's fuel oil exports over January-February were 64% higher on the year at 5.03 million mt, General Administration of Customs data showed. Most of the exports were fuel oil sold in the bonded bunker market, industry sources said.

On the supply side, China's commerce ministry had allocated 6.5 million mt of fuel oil quotas to CNPC, Sinopec, CNOOC, Sinochem and ZPC, allowing them to send tax-free domestically-produced barrels for bonded bunkering at Chinese ports, S&P Global Commodity Insights reported earlier.

While the LSFO quota of 6.5 million mt is a 30% jump from the first round of 2021, the January-February fuel oil export volumes have already hit 5.03 million mt.

Hence, China still supplements its volumes with imports mainly from Singapore.

Uneconomic pricing
However, ex-wharf cargo players have not been able to bring in volumes from Singapore, due to unfavorable pricing.

The cash differential for Singapore marine fuel 0.5%S cargoes has averaged $20.88/mt over March 1-23, according to data from S&P Global, and after adding freight costs of about $13-$14/mt, the pricing is no longer economical to ship cargoes to China, an ex-wharf supplier said.

"I'm offering my cargo to delivered suppliers at a premium of $5/mt [to Singapore marine fuel 0.5%S cargo assessments], even then they cannot afford it," the supplier added.

"Stockpiles are not plentiful in China, and we can't bring in from Singapore; if demand goes up, supply won't be able to match," a second ex-wharf supplier said.

Bunker suppliers cap volumes on tight cash flows
Zhoushan bunker suppliers have capped the volume that they offer to shipowners amid difficulties in cargo procurement due to tight cash flows, as flat prices have surged in line with international crude markers.

Shipowners typically secure bunker fuel at about 15-30 days in advance, locking in the price before payment is made on receipt of the product.

As oil prices are sharply volatile these days, Zhoushan suppliers find themselves in a bind when prices move higher on the day of delivery, making it almost impossible to secure the cargo for delivery.

Therefore, bunker suppliers in the region have put a limit on volumes they offer to shipowners, in order to make it affordable paying for the cargo on the delivery day.

"We won't be procuring any cargo supplies for Q2 as its not easy to sell with suppliers unable to afford," the first ex-wharf supplier said.

• [Editor:zhaozihao]