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Scrubber economics improve as Singapore’s Hi5 spread nears $200/mt


7 Mar 2024

Reported by ENGINE news

Changes in Singapore’s bunker prices since January:

  • HSFO benchmark up by $7/mt

  • VLSFO benchmark up by $54/mt

Singapore's wider Hi5 spread has made bunker fuel much more affordable for scrubber-equipped vessels than those running on VLSFO.

Singapore’s Hi5 spread has widened by $45/mt since early January to $190/mt now. The widening of the spread has come amid steeper price gains for VLSFO than for HSFO in the port.

Scrubber-fitted VLCCs consume around 53 mt/day of HSFO at 80% load, which means that they can save an average of $10,600/day compared to VLCCs running on VLSFO when the Hi5 spread is $200/mt, scrubber manufacturer Clean Marine tells ENGINE.

Prompt VLSFO availability has mostly been tight in Singapore since the beginning of this year. Lead times have fluctuated significantly, from as short as seven days to almost two weeks. The grade is even tighter for very prompt dates (0-3 days). Some suppliers can still supply the grade for very prompt dates, but these are usually priced about $20-25/mt higher compared to offers for dates further out.

HSFO has also been tight in the port, but steady inflows of HSFO from Russia and other countries have supported the HSFO market, a source says. Singapore has imported around 295,000 b/d of HSFO on average since January, with a major chunk of it arriving from Russia, according to cargo tracker Vortexa.

Weak utility demand in the Middle East has also led to more residual inflows into Singapore, the source adds. These factors have contributed to keep Singapore's HSFO price stable. Although, going forward, rising HSFO demand from Asian power plants could cap Singapore bunker suppliers' access to readily available HSFO volumes.

South Asian countries such as Bangladesh usually import HSFO from Singapore to run power plants and meet higher seasonal demand during the summer.

Singapore’s Hi5 spread of $190/mt is narrower than the record high of $570/mt seen in July 2022, yet wider than the low of $97/mt recorded last September. A prolonged period of wider Hi5 spreads and forecasts of wide spreads in the future could potentially reignite some interest in scrubber installations, which have tailed off since peak demand around the IMO 2020 transition.

There will be 5,318 scrubber-fitted vessels in operation this year, according to DNV data. That is up by 510 vessels from two years ago, but two years into the future there are only 39 confirmed orders.

Demand for HSFO has been robust in Singapore over the past few months. In 2023, HSFO accounted for 32% of the port’s bunker sales, up from a 29% share a year earlier. Sales of the high-sulphur grade grew by a massive 22% last year, reaching their highest level since the IMO’s 0.50% sulphur cap came into effect in 2020.

Singapore's Hi5 spread is expected to average around $150/mt this year, almost steady with the 2023 average, Wood Mackenzie’s research director Mark Williams told ENGINE earlier this year.

Fujairah's Hi5 spread is even wider at $217/mt, while Rotterdam's is considerably narrower at $107/mt.

By Tuhin Roy and Nithin Chandran

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