Total Rotterdam bunker sales volumes (excluding lubes) fell by 10% in Q2 2023, according to new data from the Port Authority.
VLSFO sales fell by 8% on the quarter to 906,368 mt, a level 15% lower than the previous year. The fuel type continued to account for the majority of demand in Q2 (excluding lubes), comprising 38% of total sales.
In contrast, HSFO sales were up 5% on the quarter, and the fuel grade’s market share increased from 30% to 35%. The total sales volume was also up on the year, sitting 18% higher than 2021 levels.
The strength in HSFO sales came despite increasingly uncompetitive pricing for the fuel grade relative to VLSFO on the quarter. Declining sour crude availability squeezed high-sulfur residual fuel production among refineries, causing prices to exceed seven-month highs in mid-April.
On average, Rotterdam HSFO bunker prices were assessed by Platts at $458/mt in Q2 2023, up 15% on the quarter, while average VLSFO prices fell by 4%, averaging $543/mt.
As a result, the average Hi-5 bunker spread, or the premium for VLSFO relative to the cheaper HSFO grade, dropped from $166/mt to $85/mt on the quarter.
Bunker traders noted that HSFO demand stickiness at the port has been a product of mass-scrubber investments in 2021. In the wake of the Russia-Ukraine war, surging middle distillate prices and desulfurization costs put pressure on VLSFO premiums, prompting shipowners to install the mandatory exhaust cleaning systems or ‘scrubbers’ mandated to burn the cheaper high-sulfur fuel grade.
Shipowners operating scrubber-fitted vessels are therefore still seeking to realize ROI from their scrubbers in 2023, continuing to opt for HSFO despite the narrower price incentive to burn it.
Fuel switching will often lag changing market dynamics as vessel upgrades need to be booked months or years in advance, and shipping industry body BIMCO estimated in March that 17% of ships in shipyards’ order books at the time were expected to be installed with scrubbers.
Despite the prevailing strength in HSFO demand, engineering firm Wärtsilä said in its H1 interim financial report July 21 that appetite for scrubbers may soon decline.
“The volatility of oil prices and any disruptions to the supply of marine fuel oils can also have a sizable impact on the price spread between high and low sulfur fuels, which might weaken the case for scrubber investments,” Wärtsilä said.
Bio-bunker demand increase
Demand for bio-bunker blends strengthened firmly on the quarter, rebounding from a decline in Q1. Some 144,970 mt of bio-blended VLSFO was sold in Q2, the Rotterdam data showed marking a 15% increase. VLSFO bio-blend sales had previously declined by 46% in Q1 from highs of 234,465 mt in Q4 2022.
The volume of bio-blended HSFO more than doubled, rising from 10,626 mt to 25,487mt.
The port of Rotterdam does not specify the percentage of biofuel included in material classified under ‘bio-blends’ in the data.
Biofuels have become a popular choice among shipowners looking to decarbonize their operations, providing a ‘drop-in’ solution that requires little to no retrofitting of vessels.
However, the often-cited downside is that if the shipping industry wishes to burn biofuels, it must compete with aviation and road fuels. The biofuels industry is increasingly turning its back on crop-based fuels, and thus competition is intensifying for advanced feedstocks — those based on waste products.
The percentage share of Rotterdam bunker sales made up by alternative fuels (including all bio blends, LNG and methanol) increased by 10% on the quarter, up from 7% in Q1.
Under the European Council’s Renewable Energy Directive (RED II), which sets binding targets for member states to reduce emissions, it is stipulated that at least 1% of all fuel supplied to the transport sector must be biofuel or so-called Renewable Fuels of Non-Biological Origin (RFNBO) — the EU’s term for green hydrogen and its derivatives, such as ammonia or methanol — by 2025.
The agreement also mandates that 1.2% of shipping fuels supplied by EU ports in 2030 have to be RFNBOs.
The IMO has set targets to cut GHG emissions from international shipping by 20%-30% from 2008 levels and have 5%-10% of global bunker consumption from energy sources with zero or near-zero emissions by 2030.
