Sales of bunker fuels in Panama slide in April to lowest volume in seven months

Bunker fuel sales in Panama sank to 383,908 mt in April, their lowest level since 381,570 mt in September 2022, following declining demand from container ships and weaker fundamentals in the global economy, as the upcoming low season looms in June.

The volume represented a 17.9% decline from March and a 19.7% retreat from April 2022, data from the Panama Maritime Authority showed late April 12.

Demand for all grades sold in the Latin American hub -- very low sulfur fuel oil, high sulfur IFO 380 and marine gasoil, including low sulfur marine gasoil -- dropped in double-digit numbers month on month, but the retreat was more pronounced in the high sulfur IFO 380 bunkers.

"There was an impact from the abrupt decline in liners' demand," a bunker source said about a possible reason for the drop.

As low consumer sentiment continues to drive down demand for finished goods, container traffic has slowed -- with many importers facing hurdles to move their existing inventories. The lack of turnover is forcing some retailers to pay to store their extra stock, with others even liquidating their excess inventory, shipping sources have said. Also, consumers are shifting their buying patterns from goods to services.

The bunker source mentioned a weak global economy as another factor.

"It is increasingly forcing demand to move to less expensive ports as long as operations allow it," the source said.

In contrast with Panama, April sales in Singapore, the world's largest bunker hub, increased 13.4% year on year and 1.9% on the month to 4.254 million mt in April.

Declines in all segments

VLSFO sales totaled 273,347 mt in April, a 15.1% drop from 322,143 mt in March and a 5.5% decline on the year. Demand for this grade was last lower in September 2022, when it registered 265,365 mt.

The fuel, which became the most widely used bunker after the International Maritime Organization rules on sulfur content were implemented in January 2020, saw a price increase of only 1% last month.

Platts, part of S&P Global Commodity Insights, assessed it at an average of $614/mt ex-wharf in Balboa, located on the Pacific coast and Panama's main bunker port. Its March monthly average was $608/mt ex-wharf.

Sales of high sulfur IFO 380 slid to 69,941 mt in April, 48% lower from 134,482 mt in the same month last year, and 25.4% under 93,725 mt in March.

It was its largest year-on-year decline since the advent of IMO-2020 regulations, which relegated this fuel, with up to 3.5%S content, to ships with scrubbers. Panama is one of the few ports where it is still available in Latin America.

The decline coincided with stronger prices for HS IFO 380 in April. Platts assessed it at a $468/mt ex-wharf monthly average in Balboa, a 12% increase from $418/ex-wharf in March.

On the third bunker grade sold in Panama, marine gasoil sales last month totaled 40,620 mt, 21.2% less than 51,557 mt the previous month and 25.2% lower year on year.

MGO, the most expensive bunker fuel with up to 0.1% sulfur, represented 11% of Panama sales in April, VLSFO encompassed 71% and HS IFO 380 18% of sales. Platts assessed MGO in April in Balboa at $819/mt ex-wharf, down 7.5% from $885/mt ex-wharf in March.

"In general, we have seen a depressed freight market globally," a second source said. "Many ships are slowing their speed as well, therefore, consuming less bunkers."

Ship speeds were reduced to 13.8 knots in the first quarter of 2023, a 4% decline from the same period in 2022, as consumer demand dwindled, according to a statement from Niels Rasmussen, chief shipping analyst at BIMCO. Rasmussen added that speeds could fall 10%, by 2025.

Fewer fuel deliveries

Reflecting lower sales, the number of ships serviced with bunker fuels in April fell to 587 from 669 in March, with 32 barges operating.

The Pacific Coast saw an increase of Panama's proportion of sales, while the Atlantic Coast registered a decline. In April, 81.3% of sales were performed on the Pacific coast, while 19% on the Atlantic coast, where the port of Cristobal is situated. In March, the proportion was 84% to 16%.

A third bunker source had a brighter perspective for May. The source said from the second week of April to so far this month, bunker sales seem to have increased, but June might be expected to be a weak month.

"A month ago, demand was on the floor, but from the second week of April it started to improve remarkably," the source said. However, "June might be the worst month of the year. Low season."