Singapore's growing bio-bunkers demand to drive surge in regional UCOME consumption

The rising demand for bio-bunker at the world's largest bunkering port of Singapore is likely to continue in 2024, which could drive a sharp increase in used cooking oil methyl ester, or UCOME, demand, market participants said.

Singapore's overall sales of bunker fuel in 2023 jumped to a record high 51.8 million mt, with bio-bunker sales jumping to 518,000 mt in 2023 from 140,200 mt in 2022, latest data from the Maritime and Port Authority of Singapore showed.

The Platts-assessed UCOME FOB Straits averaged $1,157.73/mt in 2023, S&P Global Commodity Insights data showed, while the average over August-December 2022 stood at $1,448.19/mt. The 2023 average for the Platts-assessed UCOME FOB China was $1,111.55/mt, while the average over August-December 2022 was $1,401.87/mt. Platts first began assessing UCOME FOB Straits and FOB China from Aug. 1, 2022.

As for the Platts-assessed B24 bio-bunkers Singapore, it averaged at $748.91 in 2023, S&P Global data showed. Platts first began assessing B24 bio-bunkers Singapore on May 8, 2023.

Prominent container shipping companies such as Maersk and Hapag-Lloyd, whose ships take bunker fuel at Singapore, are dedicated to reaching net-zero emissions by 2050, proactively incorporating biofuels into their ships and collaborating with their affiliated clients.

Also, this month, the EU's Emissions Trading System will be extended to cover CO2 emissions from all large ships entering EU ports, regardless of the flag they fly. Meanwhile, based on the FuelEU maritime initiative, the GHG intensity of fuels used in ships should be cut progressively -- 2% by 2025, 6% by 2030, 31% by 2040 and 80% by 2050.

In light of these directives, bio-bunkers could continue to play a prominent role in Singapore, particularly for existing ships as it is a drop-in fuel and readily available, market sources said.

"We have yet to see what 2024 has [in store] but demand is likely to increase as we are getting more and more biofuels requests from dry bulk clients," a bunker supplier said.

Additionally, more proactive measures are expected by various stakeholders in anticipation of the need to comply with Carbon Intensity Index targets and ratings set by the International Maritime Organization from 2024, which require all ships to calculate their Energy Efficiency Existing Ship Index.

Platts assessed B24 bio-bunkers Singapore $7.66/mt higher day on day at $791.30/mt Jan. 25, S&P Global data showed.

UCOME demand

Singapore's transport minister last year said that bio-bunker demand is likely to grow further in 2024.

Since B24 bio-bunker is made up of 24% UCOME, an increase in buying interest for the bio-bunker in Singapore will raise UCOME demand, market sources said.

According to the MPA data, total UCOME demand for Singapore B24 bio-bunkers has been increasing on a quarter-on-quarter basis since Q4 2021 when it stood at 2,000 mt to 192,100 mt in Q4 2023; which marked a 42.37% jump from 135,000 mt in Q3 2023.

Many suppliers in Singapore are also ramping up operations to start supplying bio-bunkers from Q1 2024.

A biofuel producer said he was "trying to get in the game before it's too late" as demand for bio-bunkers "is bound to pick up down the line."

Singapore's UCOME demand for blending in bunker fuels jumped to 13,908 mt in December 2023 from 4,944 mt a year ago, the MPA data showed.

The growing interest in biofuels, coupled with the global move towards decarbonizing the shipping sector, is making Singapore an important bio-bunker blending hub.

"For bio-bunkers, we are looking for UCOME which does not need to have high [Cold Filter Plugging Point] levels, and those are actually at a lower price than the low CFPP-level ones," a producer said.

Europe's investigation weakens China UCOME exports

In June 2023, the European Commission began a probe following a complaint by a member state regarding potential fraud associated with biodiesel imports from China. Subsequently, in December 2023, the EU initiated an antidumping investigation into biodiesel imports from China.

Should these investigations prove that China was in the wrong, the EC may impose import duties to address the impact of unfair trading. The EC stated that provisional measures could be implemented within eight months, while the investigation is expected to conclude within 14 months.

In light of the EU's investigation and the limited domestic use of biodiesel in China, producers of Chinese UCOME are proactively exploring alternative export avenues. The EU's investigations resulted in the loss of a significant export market for China's UCOME.

Bio-bunkers an alternative for China's UCOME exporters

Given the challenges in the EU, China's UCOME producers made a strategic shift to focus on supplying Singapore's growing bio-bunker market.

Despite the availability of UCOME in Malaysia and Indonesia, Singapore's bio-bunker suppliers are actively importing UCOME from China.

"Cheap Chinese UCOME is flooding the market for bio-bunkers and making it really difficult for us to sell our UCOME," a Southeast Asian supplier said.

The healthy supplies have pressured the region's UCOME prices lower. Platts assessed UCOME FOB China at $935/mt Jan. 25, down from the all-time high $1,650/mt on Aug. 15, 2022, S&P Global data showed, while UCOME FOB Straits was assessed at $1,015/mt Jan. 25, down from $1,689/mt on Aug. 15, 2022.