Global bunker sales seen rising as ton-miles recover from 2022 wobble

The outlook for 2023 is for higher global bunker fuel consumption on the back of longer expected sailing distances for vessels after sales at the key bunker hubs of Singapore and Fujairah fell in 2022, shipping analysts said.

The year 2022 was characterized by Russia's invasion of Ukraine in February and international sanctions, including a chain of European Union embargoes on certain energy products, with a growing number of companies turning their backs on Russian counterparties. That resulted in vessels travelling longer distances as the EU tried to wean itself off Russian imports of a range of goods, thereby boosting bunker fuel consumption.

"Cargo volumes, distance, sailing speed, and ship size are the most important drivers [for bunker demand]," Niels Rasmussen, chief shipping analyst at shipping industry body BIMCO, told S&P Global Commodity Insights.

Sailing speed and average ship size arguably do not change much in the short term, leaving volume and distance to translate into ton-miles, he said.

Sales of fuel oils and marine gasoil for bunkering in Singapore, the world's largest shipping hub, declined 4% on the year to 47.88 million mt in 2022, according to Maritime & Port Authority of Singapore data. Sales in Fujairah, the third largest shipping hub, slipped 2% on the year to 7.98 million mt in 2022, Fujairah port authority data showed. Singapore and Fujairah have not imposed embargoes on Russian goods.

Sales in Rotterdam, the second largest shipping hub, bucked the trend and rose 10% on the year to 10.51 million in 2022, according to data from the Port of Rotterdam Authority.

The total volume of goods handled in Rotterdam remained stable on the year at 467.4 million mt in 2022.

Container throughput at the Dutch port fell 9.6% in metric ton terms, mainly because container traffic to and from Russia came to a virtual standstill after the invasion of Ukraine. Imports of LNG, mainly from the USA, climbed 63.9% as an alternative to Russian pipeline gas. At the same time, coal imports rose 17.9% as mainly German coal-fired power plants were used more. In line with the sanctions, companies reduced imports of Russian oil, oil products and coal, and succeeded in importing them from elsewhere.

Ton-miles set to rise

Global ton-miles dipped 0.5% in 2022, according to calculations by BIMCO, and they are due to rise 2.5% in 2023 and 2.2% in 2024.

Commodities supply lines are still adjusting to the disruption in links between Russia and some of its trading partners, with Russia seeking customers further afield for commodities such as oil, while its erstwhile customers in Europe are looking for sellers from further away.

That comes amid a projected if timid improvement in global economic health over the next two years, as the world emerges from widespread coronavirus-induced lockdowns, despite the headwinds of higher interest rates and fears of a crisis in banking and credit.

S&P Global Market Intelligence projects growth in global real gross domestic product to slow to 2% in 2023, from 3% in 2022, before rising to 2.9% in 2024.

Global industrial production grew 2.8% in 2022, with the growth expected to slow to 1.4% in 2023 before rising to 3% in 2024, according to S&P Global Market Intelligence.

"The bunker market has been driven historically by the state of the global economy as GDP growth tends to go hand in hand with increased trade and consequently need for transportation," S&P Global shipping analyst Anastasia Zania said. In 2022, the market saw the impact of geopolitics, she said.