Bunkering gem in Far East Russia

But it would be a mistake to believe that this far-flung region is not getting any commercial attention. The Far East Russian bunker market, for one, is continuously developing and gradually winning over market share from competing regional markets in East Asia.

Recently, an announcement made by the Russian government that Vladivostok will become a free port in 2016 has set the stage for further growth of the bunker market in Far East Russian ports.

At present, ships calling at Vladivostok port can carry out cargo operations without tax duties, but the ships will be taxed if they only call at the port for bunkers. “With Vladivostok as a free port, there is a possibility that the tax on bunkers-only call will be lifted. Otherwise, the vessel on bunkers-only call may only need to pay 50% of port charges, without the need to arrange cargo works,” a bunker manager familiar with the Far East Russian market told Seatrade Maritime News.

“This policy will be more clear at the beginning of 2016,” the bunker manager added.

Singapore-based bunker traders have given feedback that they are losing a portion of their bunker enquiries to Far East Russian market, comprising of the ports of Nakhodka, Storvyankor, Vladivostok and Vostochny.

At present, ships plying the North East Asian region will almost definitely choose to buy the majority, if not all, of their bunker requirements at Far East Russian ports if cargo loadings are carried out, a bunker trader observed. Naturally, price is the pull factor for buyers, provided that their ships have business in Far East Russia.

According to data from Ship & Bunker, prices of Vladivostok 180 cst have ranged between $281.50-315 per metric tonne (pmt) in July. This compared to the Singapore 180 cst price range of $312-353.50 pmt during the same period, and Hong Kong 180 cst at a higher $323.50-367 pmt.

While it can be argued that Singapore 180 cst grade is mostly used as a cutter-stock and sales of the product are low, the widely sold 380 cst grade is also priced higher than the 180 cst grade in Far East Russian ports, with indications at $297.50-334.50 pmt during July.

A supplier of Far East Russian bunkers said the products available are mostly straight-run 180 cst, though 380 cst materials are also available on a limited basis. The quality is generally free from contaminations, except for the common presence of a small percentage of fresh water in the oil due to condensation in the largely freezing cold temperatures of Far East Russia.

In 2014, the Far East Russian bunker market sold approximately 8.15m metric tonnes of bunker fuel, a 79.1% jump compared to 4.55m metric tonnes sold in 2013, according to figures obtained by Platts.

The biggest port Nakhodka sold 3.51m metric tonnes of bunkers in 2014, followed by Vostochny with 2.1m metric tonnes, Vladivostok with 1.07m metric tonnes, and Storvyankor with 540,000 metric tonnes. The smaller bunkering ports include Posyet, Zarubino, Kozmino, Vanino, Kamchatka and Kurilsk.

After making Vladivostok a free port, the next potential tax-free port could be Nakhodka, according to Singapore bunker trading manager. He added that bunker sales at the Far East Russian ports are expected to grow even more once the tax-free bunkers-only call policy is implemented.

In May this year, global bunker supplier and trader Bomin Group opened a new office in Nakhodka to act as an exclusive agent for vessels wishing to call for bunkers only. Bomin said the low fuel prices have resulted in a steady upward trend in demand for marine fuel and gas oil in the region.