180 CST fuel market shrinks on regulation, market economics

180 CST fuel market shrinks on regulation, market economics
  • NW European demand falls on tougher ECA zone sulfur rules
  • Pockets of demand persist in Mediterranean ports
  • Low viscosity fuel increasingly marginal in global bunker pool

Demand for 180 centistoke grade bunker fuel in the Northwest European market has all but disappeared at the start of 2016, according to traders and
suppliers, just over a year after new MARPOL regulations on shipping emissions dealt a further blow to a product already being undermined globally by newer
vessels able to handle higher viscosities.

“The fuel is obsolete,” said Ed Freese, managing director of Dutch bunker company Petrol Bunkering & Trading. He said his company might get two or three inquiries for the fuel a year compared to the thousands for 380 CST, the main grade of bunker fuel.

Other traders in the Northwest European bunker market have noted the lack of demand for 180 CST. One German bunker trader said that his sales of 180 CST grade amounted to no more than 20-30 mt a year, while a Gothenburg-based bunker trader said he saw a stem fixed “once every three months.”

In Gdansk, only one of the three bunker suppliers offer the fuel.

The principal reason for the diminished demand in Northwest Europe is the lower sulfur cap on fuel used in the Emission Control Area (ECA), which was
lowered to 0.1% from January 2015.

As a result, feeder shipping services between north European and Scandinavian ports have switched from 180 CST to distillate-type fuels in order to meet ECA stipulations, say traders.

The same explanation is offered by Timothy Wilson, principal fuel specialist at Lloyd’s Register Marine Consultancy.

“Older ships operating in the ECA would have used 180 CST fuel oil and now take ultra-low sulfur fuels,” said Wilson.

He added that there would still be demand for the grade from vessels operating outside as well as inside the ECA, although perhaps to a lesser extent.

The distinction for ships is that 180 CST requires less heating than is required for 380 CST to achieve the correct injection viscosity prior to use. Older ships tend to have less fuel preheating capability by design, requiring them to use a maximum viscosity grade of 180 CST, which would explain in part the leftover demand as those ship are nearing the end of their operational life, Wilson said.LOW VISCOSITY FUEL DEMAND PERSISTS IN MED, BLACK SEA

In the Mediterranean, meanwhile, older tonnage is keeping the demand for 180 CST alive.

A trader on the Istanbul market said in the Mediterranean and Black Sea, “vessels are not so big, mostly around 5,000-10,000 dwt, with small engines” adding that “they prefer to burn 180 CST” or product with even lower viscosity, such as 120 CST, 60 CST and 30 CST.

He said that in the area “you cannot find many new vessels,” therefore demand remained healthy for low viscosity fuels.

Another trader in the Mediterranean said 180 CST fuel oil was seen maintaining a premium of around $20/mt against 380 CST in Algeciras, with the low viscosity product being obtained by blending 380 CST and MGO.

He said average monthly demand for 180 CST materials stood at around 2,000 mt in Gibraltar and around 3,000 mt in Malta, with typical buyers represented by older vessels and vessels with smaller engines.

Bunker trading sources in Italy said that some residual demand for 180 CST bunker fuel remained in the Adriatic — namely Ravenna and Trieste — as older and smaller vessels needed this type of material. However, elsewhere in the Mediterranean, they said, demand for low viscosity bunker fuel was declining.

GLOBAL 180 CST SALES IN DECLINE

The global picture is one of shrinking demand for lower viscosity fuels. In Singapore, the world’s largest bunkering hub, sales of 180 CST bunker fuel
have fallen from 2,271,900 mt in 2010, to 673,400 mt in 2015, according to data from the Maritime and Port Authority of Singapore, or from 5.6% to 1.5%
of total annual bunker demand in the port.

“Economics are driving this change,” said marine fuels consultant Robin Meech.

Newer ships can happily burn 380 CST whereas 180 CST requires distillate material to achieve the blend. Even allowing for the extra cost required to heat 380 CST to a point where it can be used, it is still cheaper to use than 180 CST.

“That’s the basic economic case behind the shrinking market for 180 CST,” Meech said.