6 January 2021

2020 Market Review

With 2020 now in the rearview mirror, ClearLynx took some time to review what was quite a tumultuous year. Going into 2020 the big change was obviously IMO2020 and the switch from HSFO 3.5% to VLSFO 0.5%. Based on ClearLynx transactional data from 2019 & 2020 the switchover is evident.

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The big takeaway is the 50% increase in VLSFO lifts, clearly becoming the dominant fuel around the world, as it grew from 15% of lifts to 65% in 2020. There was also a slight uptick in LSMGO 0.1%, almost drawing even with HSFO in terms of total lifts. Another small takeaway is that ULSFO lifts fell from ~2% of all ClearLynx stem to under ~1%.

Price Impact

While IMO2020 may have been the big story heading into the year, by the time January and February had passed, the thing on everyone’s mind was, and still is, Coronavirus and its impact. With the Coronavirus pandemic in full swing, it caused fuel demand to plummet and with that came a sharp fall in the price of fuel.

The below graph shows HSFO/VLSFO on average for the year with the spread included. As can be seen, what was once a $200+ spread in many ports quickly dwindled to well under $100, a painful sight to those that had invested in scrubber technology. By December 2020 the HSFO/VLSFO spread had widened to its highest levels ($86 VLSFO premium on avg) since back in March when the spread hovered around $100.

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When looking at individual ports (see below for Houston, Fujairah, Rotterdam, & Singapore) for Q4, you can see the widening of the spread occur as December rolls along. The lowest the spread fell was just under $30 in Houston for a short period of time in November. The widening spreads toward the end of the year are a welcomed sight to scrubber investors as the larger the spread between the two grades, the sooner their ROI will be realized; no owner wants to still be paying for their scrubber installs by the time IMO2030 begins to roll around with its additional 40% reduction of CO2.

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Another theme that developed over the course of 2020 was intraday volatility, especially in Singapore. As seen below, ClearLynx studied individual weeks in each quarter to show both the weekly high / low spread, (as high as $80 back in January, to a much tighter $24 in mid-December), as well to give an idea of price movement throughout the year, showcasing the recovery that has occurred since the lows of April.

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Stem Size

When looking at Singapore VLSFO stems in 2019 versus 2020 a few things stand out. The first being that the share of stems between 151-400 MT fell from 28% of VLSFO lifts in 2019 to 15% in 2020, this is perhaps due to new barging charges in Singapore for small quantity orders, thus making buyers change their buying habits and order more to avoid additional barging. This is also showcased through the 5% drop in lifts between 201-250 MT (6% in 2019 vs 1% in 2020). There was an 11% jump in lifts ranging 401-1500 MT, going from 60% in 2019 to over 70% in 2020.

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Predicting the Future

Based on current market trends ClearLynx has developed the below forecast for where VLSFO prices have the potential to reach in 2021.

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When looking back even to just December 21st, the price movement is evident. Prices in Singapore have risen from $390 to right around $415, a $25 jump. In Houston over the same period, prices have jumped from $370 to over $385. Similarly, Rotterdam has gone from $370 to $384 and Fujairah has jumped from $400 to $420. There has certainly been significant price movement occurring in the infancy of 2021.

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Through our bunker procurement, pricing and analytics platform, we have unique visibility of actual and indicative pricing, product requirements, availability and completed transactions across the market. By aggregating this anonymized data, coupled with over a decade of historical data, we can provide insight into market activity, current trends and commentary on potential future outcomes. 

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