Zhoushan, Shanghai LSFO differential flips to discounts amid weak demand

Premiums for Zhoushan- and Shanghai-delivered 0.5%S bunker over FOB Singapore marine fuel 0.5% cargo values both flipped into a discount of $2.19/mt on March 18, hitting an eight-month low as persistently poor demand worsened by prolonged weather disruptions finally erased the thin premiums since mid-January.

Platts data showed that the Zhoushan differential was last lower on June 28, 2024, when it sank to a discount of $2.82/mt, while the Shanghai differential was last recorded lower on June 27, 2024, at a discount of $3.56/mt.

At Zhoushan, LSFO offers were heard in the range of $496-$525/mt, with delivery dates in the range of March 23-30, but eventually, a parcel traded at $500/mt for March 24 delivery onward.

At Shanghai, while LSFO offers came in slightly in the upper range of $500-$510/mt, for March 21-30 delivery, the lowest trade was heard at $498/mt for a 1,200 mt parcel for March 30 loading.

Platts assessed the grade for Zhoushan and Shanghai at $498/mt on March 18, down $6.22/mt day over day.

March demand has languished further than February amid a cold spell in the first two weeks that halted bunkering intermittently at Zhoushan, with the outer anchorages suspended for most of the period and forced some order cancellations.

After a turbulent two weeks, weather conditions are expected to ease in the coming week, according to the latest weather data by Zhoushan Marine Meteorological Research Center, with wind speeds largely within the 29-49 km/h in the week to March 26, apart from some sporadic gales in the 50-74 km/h range March 23-26.

Entering into March, LSFO ullage at Zhoushan contracted 2.6% month over month to 2.14 million cu m as of March 4, but still marked a notable 66.9% annual increase, according to Zhejiang Mercantile Exchange data.

Chinese refiners' domestic LSFO production for March is largely expected to remain stable month over month when maintenance season starts, coupled with the weak margins, a JLC analyst noted.

According to JLC data, China's refineries produced 1.15 million mt of low-sulfur fuel oil in February, a decrease of 12.55% month over month and 8.22% year over year. This indicates a month-over-month and year-over-year reduction in production.

January LSFO output at China's refiners totaled 1.315 million mt, according to data from JLC, although this represented a 2.45% contraction year over year.

Zhoushan taps divert demand from Singapore

Amid stiff regional competition arising from adequate export quota availabilities, aggressive LSFO bunker prices around Zhoushan also captured some downstream demand from the world's largest bunker hub of Singapore since the start of 2025, traders said.

Thus, Singapore's downstream LSFO demand volumes have suffered as a result, intensifying competition among suppliers within the city-state itself and depressing delivered premiums, while also struggling to draw down its plentiful stockpiles.

"We managed to close [spot LSFO] deals, but with much difficulty," a Singapore-based trader said March 19, citing aggressive offers from local suppliers.

Since the first quarter of this year, some shipowners have diverted a portion of their spot and term contract requirements to Zhoushan hub instead, to capitalize on the competitive pricing.

Price spreads of Singapore's delivered LSFO versus the same delivered grade on Zhoushan widened to average $4.62/mt since first quarter to date, flipped from minus $19.34/mt previously across Q4 2024, according to Platts data.

The Platts-assessed Singapore-delivered Marine Fuel 0.5%S bunker premium over the benchmark FOB Singapore Marine Fuel 0.5%S cargo averaged $10.26/mt so far since March, trending down from $10.91/mt in February and $15.50/mt across January.