Zhoushan Bonded Bunker Price Dropped Amid Weak Demand
● Zhoushan bonded bunker prices dropped sharply in February amid the stagnant shipping industry.
● China’s VLSFO supply is sufficient as more and more domestic refineries are producing VLSFO with the VAT rebate rate of 13%.
Bonded bunker prices at China’s Zhoushan Port dropped sharply in February. The monthly average price of HSFO 380CST was $361.07/mt, down $73.48/mt or 13.91% in February from January. The monthly average price of VLSFO was $540.43/mt, down $152.02/mt or 21.95% from January. The monthly average price of MGO was $548.93/mt, down $150.25/mt or 21.49% from January.
First, international crude oil prices went down obviously in February, impacted by the public health issue. The market sentiment was dragged down, and the global stock markets lost ground. In February, WTI averaged at $50.93/bbl, down 11.78% month-on-month, and Brent averaged at $55.74/bbl, down 12.59% month-on-month. Singaporean fuel oil prices entered the downtrend, following international crude oil prices. Meanwhile, Singaporean fuel oil prices are the basis of Zhoushan bonded bunker prices. Therefore, bunker prices at Zhoushan dropped.
Second, on January 22, China announced the value-added tax rebate policy on fuel oil exports, and the value-added tax rebate rate is 13% which equals to the full value-added tax rate. The policy encourages domestic refineries to produce VLSFO for exports. Sinopec plans to produce 10 million mt in 2020, and PetroChina plans to produce 4 million mt in the year. China’s supply of VLSFO is increasing.
Third, the global shipping industry is influenced greatly by the public health issue. The BDI averaged at 457 in February, down 258 or 36.08% month-on-month. The BDI dropped to the bottom in the month and then rebounded slowly. The ocean freight of various ship grades went down. The weak shipping industry dragged down the market demand for marine fuel.
It is predicted that international crude oil prices will remain at low level in March, and the public health issue is spreading in more countries. Meanwhile, more and more China’s domestic refineries are preparing for the production of VLSFO. All in all, SCI predicts that Zhoushan bonded bunker prices will remain in a downtrend in March.
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