Red Sea disruption complicates bunker supply on eve of EU ETS tax era
Some shipping companies will have to deal with longer voyages and extra spot bunkering requirements if their ships have diverted. This layer of complexity comes just as the industry is a little over a week away from EU ETS tax implementation
Longer voyages will increase CO2 emissions that will fall foul of the EU ETS tax in 2024, while also adding to companies’ voyage costs as bunker prices are typically higher in ports other than main refuelling hubs such as Singapore, Rotterdam and Fujairah
THE Red Sea disruption following attacks by Yemen’s Houthi rebels complicates voyage planning efforts that include bunker supply requirements, with a little over a week before the European Union’s Emissions Trading System tax takes effect for shipping.
Vessels may have to pay for more expensive bunker fuels if they need refuelling for longer voyages around Africa, because marine fuel prices are typically higher at ports other than main hubs including Singapore, Rotterdam and Fujairah.
Very low sulphur fuel oil prices in Cape Town — a potential bunkering location for vessels diverting via Africa — were at $697.50 per tonne, compared with $609.50 per tonne in Singapore, the world’s biggest bunkering hub, according to price reporting agency Argus Media.
A bunker fuel trade for a rare grade was reported this week in Kenya’s Mombasa port, with low-sulphur marine gasoil changing hands at $1,159 per tonne, according to live bunker benchmark platform Engine.
Vessels that will sail in emission control areas must burn fuels with a maximum sulphur content of 0.1% and low-sulphur marine gasoil is the most popular ECA fuel.
South African ports had scarce low-sulphur marine gasoil supply even before the disruption in the Red Sea started, according to market sources.
South Africa’s bunker suppliers rely on fuel oil imports, as the country has limited refining capacity. The country imported around 60,000 tonnes of fuel oil per month in 2023 so far, according to oil analytics firm Vortexa.
Bunker suppliers reported higher enquiries in some West African ports as well as the ones near the Strait of Gibraltar, such as the Canary Islands, sources said.
Marine fuel prices in Africa are yet to respond to potential demand in the coming weeks, as prices have only risen slightly in Cape Town and Lome. But scarce supply and rising demand in the coming weeks could result in higher prices.
Shipping companies also need to take potential increases in CO2 emissions into account when planning voyages that will end in 2024, as they will have to pay for EU allowances, also called EUAs, to comply with EU ETS tax.
Companies that had planned to use biofuel blends to cut CO2 emissions might not be able to find such fuels in smaller bunkering ports, as securing biodiesel supply in such ports requires planning in advance.
A suezmax rerouting via Africa will emit around 3,000 tonnes extra CO2 and additional EUA requirements of around 600, according to shipping emissions analytics company Siglar Carbon.
