The price difference between China's bonded bunker low sulfur fuel oil (LSFO) and high-sulfur fuel oil (HSFO) shrank to $50/t as of June 25, touching the 4-year low, according to OilChem.
Up to now, China has released two batches of LSFO export quotas of 12 million tonnes in 2024, up 1 million tonnes or 9.10% year-on-year. In addition, Sinopec, PetroChina and CNOOC, China's three major state-run refineries, raised the production of LSFO in the first half of 2024, on modest deep processing profits. As a result, China's LSFO production totaled about 6.32 million tonnes over January-May, a year-on-year increase of nearly 500,000 tonnes or 8.50%. Sinopec surpassed PetroChina to rank first in LSFO production in China, with its production gaining about 11.30% year-on-year, and the production of CNOOC also rose 53.60% year-on-year, data from OilChem showed.
However, the demand for bonded LSFO was sluggish, as its cost performance was poor than bonded HSFO and some ship-owners chose to fuel in Singapore. Based on OilChem's data, China's bonded bunker LSFO consumption stood at 6.64 million tonnes over January-May, up only 2.0% year-on-year, with its proportion dropping by 3 percentage points over year to 77%.
China Bonded Bunker LSFO Consumption
Source: OilChem
As for HSFO, the supply tightened in China, since Middle East refineries reduced the exports of HSFO to Asian markets. Meanwhile, in the face of narrowed refining profits and rising costs of HSFO, domestic refineries stopped or lowered the production. Nevertheless, the demand for bonded HSFO maintained momentum, as the cost of installing a desulphurization tower has dropped to less than $200,000. China's bonded bunker HSFO consumption totaled 1.43 million tonnes in the first five months of the year, up more than 20% year-on-year, with the proportion climbing by 3 percentage points over year to 16%, data from OilChem showed.
China Bonded Bunker HSFO Consumption
Source: OilChem
Bonded Bunker HSFO and LSFO Price Difference in Zhoushan
Source: OilChem
As of June 25, the selling price of bonded LSFO was about $600/t in Zhoushan, while that of bonded HSFO was about $550/t, making the price difference slipping to $50/t, hitting 4-year low. Compared with January, the average selling price of bonded LSFO declined 7.70%, while that of bonded HSFO jumped 15.70%, making the spread dipping from $171/t in January to $52/t in June, down 69.60%, according to OilChem.
Given the strong demand and price of bonded HSFO, OilChem predicts the price difference might remain low at $50-100/t in the second half of the year.
Written by Catherine Sun, sss@oilchem.net
Edited by Aggie Hu, huchenying@mysteel.com