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Low-sulphur fuel prices rise

Very-low sulphur fuel oil (VLSFO) prices had risen to USD710 per metric tonne in Singapore on January 2, 2020, a price increase of 30 percent when compared to December 2, 2019.

IMO regulations entered force on January 1, 2020 that cut the allowable sulphur content in marine fuel from 3.5 percent to 0.5 percent, unless the ship is fitted with an exhaust gas cleaning system.

The global sulphur cap marks a milestone for the shipping industry and is likely to affect the profitability for many shipowners and operators.

According to BIMCO, the price spread between low-sulphur fuel oils and high- sulphur fuel oil (HSFO) widened significantly in the second half of 2019, mostly due to the price volatility of HSFO.

Through December, low-sulphur fuels started to increase significantly in price, added BIMCO.

Currently, BIMCO’s data suggests that the VLSFO-HSFO spread in Singapore is at USD340 per metric tonne, the third highest level since low-sulphur fuel became widely available. Similarly, the low-sulphur marine gas oil (MGO)-HSFO spread is at USD346 per metric tonne, the highest level since 2014.

“Translating the VLSFO-HSFO price spread into shipping terms, a ship burning 20 metric tonnes of fuel per day will effectively double its daily fuel costs from USD7,400 per day to USD14,200 per day when switching from HSFO to VLSFO,” said BIMCO. “Such an uptick in fuel oil costs will surely have financial implications for many companies.”

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