Hong Kong's ex-wharf HSFO term premiums edge down in November on poor demand

Hong Kong's term contractual ex-wharf premiums for 380 CST high sulfur fuel oil cargoes to the FOB Singapore cargo value declined in November amid weak HSFO demand at the key regional port, market sources said Nov. 8.

Deals for Hong Kong's November-loading term contractual supply of ex-wharf 380 CST HSFO were inked at lower premiums of $32-$40/mt to the FOB Singapore cargo value, down from $35-$40/mt in October, as HSFO fundamentals at the port weakened month over month.

"Spot demand for HSFO is slightly lower this month," a Hong Kong-based bunker trader said, adding that term demand, however, remained steady month over month.

Furthermore, upstream production of HSFO declined, as narrowing profit margins led refineries to allocate resources toward producing other refined products instead.

"The eagerness for production is low as overall costs are increasing, leading many to feel that it is unnecessary to continue. HSFO sales are shrinking, and this is likely to cause tightness in supply," a Hong Kong bunker supplier said.

Additionally, with some cargoes in Hong Kong being off-spec, several bunker suppliers are experiencing declining inventories of HSFO available for delivery.

The Platts-assessed premium for Hong Kong-delivered 380 CST HSFO cargo over the FOB Singapore cargo value was at an average of $40.65/mt in November to date, down 18.2% from October's average of $49.70/mt, S&P Global Commodity Insights data showed.

Platts most recently assessed the premium at $34.44/mt at the Nov. 8 Asian close, down $2.21/mt, or 6.03%, from Nov. 7, the data showed.

Previously, HSFO in the Hong Kong market found some support from severe weather conditions in the Chinese bunkering hub Zhoushan, which led to the closure of outer anchorages and disrupted barging operations at the port.

However, with the improvement in weather conditions and the arrival of fresh HSFO cargo shipments into Zhoushan at the end of October, shipowners have resumed bunkering operations at the port.

"Demand was good before. Now, the South China region is the main area for shipowners to choose [when they have to do bunker-only calls]," another Hong Kong-based trader said.

The Platts-assessed spread between Hong Kong's delivered marine fuel 0.5%S bunker prices and the same delivered grade at Zhoushan averaged $6/mt in November to date, widening slightly from October's average of $3.33/mt, according to Commodity Insights data.

Platts most recently assessed the spread at $1/mt at the Nov. 8 Asian close, the data showed.