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High price spread driving HFO sales, scrubber installations

Photo: Marcus Hand Vessel bunkering in Singapore port
High sulphur fuel oil (HFO) sales and scrubber installations have increased on the back of the wide price spread with very low sulphur fuel oil (VLSFO).

While bunker prices have come off the highs seen early this year the spread between HFO and VLFSO remains high making scrubbers allowing vessels to burn HFO an attractive option.

Looking at prices from Ship & Bunker IFO380 HFO in the Port of Singapore is priced at $395.00 per tonne compared to $716.00 per tonne for VLFSO a difference of $312 per tonne. For Rotterdam HFO is priced at $419.50 per tonne while VLFSO is $645 per tonne, a lower but still substantial differential of $225.50 per tonne. Pricing in Fujairah is fairly similar to that in Singapore with HFO at $411.50 per tonne and VLFSO at $716.00 per tonne, a spread of $304.00 per tonne.

The high price spread has seen more owners with scrubber fitted vessels opting to use HFO and figures from the Maritime & Port Authority of Singapore, which regulates the world’s largest bunkering port, showing HFO now accounting for nearly 30% of all monthly bunker fuel sales compared to around 25% previously.

In August figures from the MPA showed that HFO sales were 1.23m tonnes, some 29.8% of total bunker fuel sales of 4.12m tonnes for the month. Until July and August sales of HFO had generally hovered around 25% of total bunker sales in Singapore.

The high price spread between HFO and VLFSO is also driving shipowners to invest in scrubbers. A participant at Sibcon 2022 in Singapore noted that price spreads had “pretty crazy this year” and this was driving more owners to look at installing scrubbers. Back in June Oman’s Asyad Dry Dock told Seatrade Maritime News that it had seen a growing number of customers retrofitting scrubbers to their vessels.

According to classification society DNV some 4,819 ships in the global fleet either have scrubbers installed or on order. Of these the vast majority – 4,013 – are open loop scrubbers which are banned from being operated in the waters of a number of countries and ports around the world.

A decision to install scrubbers will be weighed heavily by where owners believe the HFO is headed and whether the price spread with VLFSO will remain as high as has been seen this year.

A report by Integr8 Fuels noted that Singapore HFO prices are now at their lowest levels since August last year. However, looking ahead it said “HFO prices are likely to rise relative to crude as we go through the northern hemisphere winter on the back of a seasonal rise in fuel oil demand and potential additional requirements into power generation.”