COMMODITIES 2025: Singapore bunker demand to continue rally amid reroutes, scrubber fleet growth

This is part of the COMMODITIES 2025 series where our reporters bring to you key themes that will drive commodities markets in 2025.

The world's largest bunkering hub Singapore will likely see marine fuel demand continue rising well into 2025, buoyed by high sulfur fuel oil demand, as longer voyages amid reroutes -- leading to higher bunker frequency -- have become the norm for many scrubber-fitted ships, industry players told Commodity Insights Dec. 5-27.

However, overall profits may remain capped, especially for IMO-compliant bunker grades, amid stiffer competition from regional hubs like China's Zhoushan and Malaysia's Klang and Tanjung Pelepas, industry sources said.

Ships have been avoiding Red Sea lanes since end-2023 amid Middle Eastern geopolitical tensions and will continue to detour around the Cape of Good Hope well into next year, shipping executives told Commodity Insights.

Already, Singapore's January-November HSFO sales, which totaled 18.4 million, have surpassed last year's total by about 10%, Singapore's Maritime and Port Authority data showed.

HSFO made up 36.6% of Singapore's average monthly bunker sales in 2024, up from 32.2% in 2023 and 29.2% in 2022, according to MPA data.

The uptick in HSFO sales also comes as the global scrubber-equipped fleet is expected to grow 7.7% year over year to 5,790 in 2024, according to the latest data from classification society DNV's Alternative Fuel Insights.

HSFO demand is expected to rise further in 2025, as DNV expects the global scrubber-equipped fleet to grow by another 4.2% to 6,032 in 2025, although growth is expected to slow in 2026 and 2027.

The slower fleet growth coincides the Hi-5 spread -- the spread between Singapore 0.5% sulfur marine fuel oil and benchmark HSFO cargo prices -- narrowing over 14% so far in 2024. Platts, part of Commodity Insights, assessed the spread at $94.25/mt Dec. 26.

The spread may weaken further as more switch to HSFO in 2025, said a Singapore-based fuel oil trader, although it is expected to mostly maintain within healthy range of at least $50-$100/mt, which generally incentivizes shipowners to install scrubbers over using renewable fuels to cut pollutants emissions.

Meanwhile, HSFO supply in Singapore should remain sufficient with Russian flows towards the East, coupled with lower imports by China's independent refineries, traders added.

Rising competition

Low sulfur fuel oil prices at the Singapore bunker hub is expected capped in 2025, amid intense regional competition and expectations of ample supplies, traders also told Commodity Insights.

"We don't have a good view of LSFO demand for 2025. There's competition from nearby Malaysia to northern China," said a Singapore-based bunker trader, adding that Trump's presidency casts uncertainties over trade dynamics and arbitrage flows.

Singapore's January-November 2024 LSFO sales, excluding bio-bunker, slid almost 3% year over year to 27.1 million mt, MPA data showed.

The Platts-assessed Singapore-delivered marine fuel 0.5%S bunker premium over the FOB Singapore Marine Fuel 0.5%S cargo values averaged $18.76/mt in 2024 as of Dec. 26, down from $21.37/mt in 2023 and $43.10/mt in 2022, Commodity Insights data showed, pressuring barging spreads and suppliers' downstream profit margins.

However, for China's Zhoushan, the government's allocation of LSFO bonded export quotas in 2025 could impact its competitiveness. Market participants anticipate similar or slightly reduced quota allocations in 2025, compared with the 13 million mt issued in 2024.

Price spreads between Zhoushan-delivered marine fuel 0.5%S bunker and the same delivered grade at Singapore averaged $3.77/mt in 2024 as of Dec. 26, narrowing from $4.86/mt in 2023, Commodity Insights data showed.

"LSFO may regain momentum, but premiums [are] limited," the fuel oil trader added.

Green needs

With the FuelEU Maritime regulation commencing in 2025, industry players also expect the move toward greener bunker fuel to drive bunker demand in Singapore in the year ahead, albeit to a lesser extent compared with conventional fuels.

FuelEU Maritime targets a 2% decrease in greenhouse gas intensity by 2025, progressively increasing to an 80% reduction by 2050, by limiting the yearly average well-to-wake GHG intensity of ships above 5,000 gross tonnage calling at European ports.

Already, Singapore's biobunker demand is showing signs of growth because of the regulation, alongside renewed Carbon Intensity Indicator targets, with several term contract tenders from European and Japanese container lines issued for the first and second quarters of 2025, industry players added.

Singapore sold 776,300 mt of bio-bunker fuels over January-November 2024, surpassing its entire 2023 sales by 48.2% so far, MPA data showed.

"Maybe we were a bit of a first mover. Our volumes have increased as well, but so have many of the other players. So it's difficult to say," its CEO Emma Mazhari said. "I don't think we're going to be number one [in 2024], because the market has scaled up a lot."

This comes as Singapore's overall 2024 bunker sales are well-poised to hit a new record high in 2024. In the first 11 months, Singapore sold 50.2 million mt of bunker fuel, just 1.6 million mt shy of its current record high of 51.8 million mt in 2023, MPA data showed.