Following the implementation of the 0.5% sulfur limit on marine fuels for all vessels in China’s Yangtze Delta Emission Control Area from October 1, demand for low sulphur marine gasoil has tightened the already short supply.
Previously, 0.5% or less sulphur fuel only has to be burned while vessels were at berth, or one hour prior to the arrival at berth and during the first hour after leaving. It is now mandatory for all vessels to switch to low sulphur marine fuels prior to entering into the ECA zone.
Robust domestic demand for gasoil coupled with the new rule has crunched the marine fuels market. “Refineries are not prepared for the sudden increase in demand,” a supplier said.
“The domestic market for gasoil has been tight since early May, right now with the ECA, the tightness is getting worse,” the supplier added.
Low sulfur fuel oil, the LSMGO alternative, is available in limited quantities in China.
Refineries in China are geared towards the production of higher value products, and therefore do not produce enough fuel oil, where requirements are typically imported.
Currently, only Chimbusco is able to supply LSFO in limited quantities. “[Chimbusco] is producing a small quantity of LSFO to test the market, to try out the fuel and see if the quality meets requirements,” a source with knowledge of the matter said.
“Presently shippers can burn HSFO, the market for LSFO is too small,” the source said.
Offers for Shanghai delivered LSMGO were heard between $840-$860/mt on Wednesday, the highest among North Asian ports, where offers were in the $700-$800/mt range. The price of Shanghai-delivered LSMGO rose to $837/mt on Wednesday, the highest since S&P Global Platts began assessing on June 1, 2017.