Bunker Fuel Market
Global Industry Analysis (2017- 2020), Growth Trends and Market Forecast (2021 – 2025)
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Market Expects an Uptick with LNG Gaining Preference as Bunker Fuel
Despite the disruptions, and delays imposed by the global COVID-19 pandemic over the shipping, logistics, and supply chain industries, the world’s trade scenes are showing strong signs of recovery. Although the ship crew movements are regaining their momentum, the scars are influential and will cast a lasting impact on the overall trade scenario for quite a while. The demand for bunker fuel is thus also experiencing the heat of the situation. However, of late, the liquified natural gas (LNG) trade is flourishing, LNG-based vessels is garnering preference for trade purposes, and LNG infrastructure is proliferating at an impressive rate. This will most likely uplift the growth outlook of the global bunker fuel market in the forecast period.
Bunker Fuel Sales Buoyant with an Expanding World Fleet
The global commercial fleet exhibited growth by nearly 81 million dwt from January, 2019 to January, 2020, suggests UNCTADstat data. It also points to the remarkable rise in tonnage, especially of bulk carriers, over the recent past. The Baltic and International Maritime Council (BIMCO) has projected more than 6% growth for the world fleet by the end of 2026. The segment of LNG tankers is reportedly growing more prominent. While the global fleet roughly constituted 90,000 vessels as of 2020, around 60% of them currently ride the international routes. The routine operations of these commercial vessels, as well as recreational vessels such as yachts, and boats sustains significant bunker fuel consumption volumes.
New Opportunities Likely to Gather as Marine Trade Embraces a Switch to Low Sulphur
Heavy fuel oil (HFO), a dominating choice in the market so far, will soon see a steep drop in consumption. As clean fuels gain ground in line with rising environmental concerns, the International Maritime Organization (IMO) has made it a point to pull down the shares of high-sulphur fuel oil in marine trade activities. The IMO’s 0.50% global sulphur cap (in effect from January, 2020) is expected to compel operators to retrofit their vessels with filters for compliance. While this has given a push to low-sulphur fuel oil, and LNG as bunker fuels, the bunker fuel market is set to witness an influx of opportunities in the near future. Besides HFO, the other key bunker fuel types such as intermediate fuel oil 180 (IFO 180), and intermediate fuel oil 380 (IFO 380) will also most likely lose market shares to emerging low-sulphur fuel choices. The other prominent fuel types include marine gasoil (MGO), marine diesel oil (MDO), and marine fuel oil (MFO).
Moreover, an increasing number of activities in the hydrogen resource development segment is bolstering the requirements of bunkers in crude oil and product tankers, thereby boosting the bunker oil market growth. Uncertainties, stress, and pricing war will however continue to hover over the market due to the US-China trade war, and geopolitical unrest between China, and India.
Continued Quality Issues Remain Growth Prohibitors for Bunker Fuel Market
As reported by the global marine fuel quality testing and inspection authorities, the average quality of bunker fuel will most likely remain on a poor side as the quality issues with high sulphur fuel oil (HSFO), low sulphur fuel oil (LSFO), and very low sulphur fuel oil (VLSFO) are expected to remain heightened despite the oil and gas world gradually approaching recovery post-COVID-19 disruptions. Besides quality issues, the compatibility, and stability of bunker fuel as a marine commodity continue to be the pressing challenges facing industry participants - especially the shipping companies. Exploring multiple blending components, including biofuels, might further add to the quality issues.
However, the impact of undesirable bunker fuel quality can be alleviated if shipowners subject bunker oil to regular quality testing to ensure the homogeneity, and stability are maintained. Storing oils in bunker tanks for a longer duration is also considered a quality deterrent. With awareness about this growing over time, and regional authorities looking after the issues closely, the challenge will possibly mitigate in the long run. Currently, the bunker fuel quality issues are posing greater challenges to market expansion in smaller ports as they typically lack the desired stringency of regulatory enforcement.
China Chases the Prime Spot; Asia Pacific Reigns Supreme in Global Market
Maintaining dominance in the global bunker fuel landscape, the market in Asia Pacific is delivering robust performance banking on strong contributing countries like China, Singapore, Japan, India, and Australia. China’s significance in marine fuels is soaring at a brisk pace, and the annual valuation roughly exceeds US$100 Bn. The country, on the back of its fostering maritime trade and mounting refining capacities, is en route to reshaping the global marine fuel industry and become the world’s most influential hub for marine fuels. With China striving to throw most of the North Asian contenders out of competition through underbidding, it has remained the world’s fourth largest and one of the busiest container ports. As far as manufacturing is concerned, China remains the global leader. China's competitive pricing strategies helped the market benefit from a massive bunkering volume drop in neighbouring Hong Kong over 2020, in the backdrop of COVID-19 pandemic situation.
While the overall bunkering market of Asia expects a promising growth outlook, multiple emerging ports in China will remain the important contributors to this progress. Singapore will also continue to represent an important bunker fuel market for the region. On the other hand, Australia has been one of the largest LNG exporters, which is now driving the overall marine trade, thereby fuelling the bunker fuel market.
Partnerships, and Acquisitions Key to Win over Competition in Bunker Fuel Space
Some of the prominent players in the global bunker fuel market include Exxon Mobil Corporation, The PJSC Lukoil Oil Company, BP p.l.c., Sinopec Group, Royal Dutch Shell PLC, Gazprom Neft PJSC, Total SE, PETRONAS Global, Chevron Corporation, Neste Oyj, Valero Energy Corporation, Bomin Bunker Oil Corp, Saudi Arabian Oil Company, Minerve Bunkering, Marathon Petroleum Corporation, Gac Bunker Fuels Limited, and World Fuel Services Corporation. To remain competitive in the global bunker fuel market space, key companies have been relying on business expansion, and strategic partnerships. Acquisitions also remain a preferred move for many in the competition landscape.
- Lukoil’s subsidiary, Lukoil Marine Bunker Ltd. recently announced the acquisition of two bunkering tankers as it looks forward to stronger market positioning in the Gulf of Finland’s bunkering sector. The acquisition of G. Rossini, and G. Puccini specifically targets the company’s operation in Big Port St. Petersburg
- In September, 2019, Koole Terminals signed a bunker fuel production agreement with Maersk Oil Trading. This deal is expected to push the latter for VLSFO bunker fuel production. In the long run, the agreement may enable the company to augment its bunker supply volumes in Europe