The bunker fuel market in Asia-Pacific is expected to grow at CAGR of more than 16% during 2020 - 2025. The increasing preference of LNG-based vessels and growing LNG trade are among the significant factors driving the demand for bunker fuels in Asia-Pacific during the forecast period. Moreover, with the imposed restriction on HSFO, post-2020, VLSFO is expected to create significant market demand. However, the recent outbreak of COVID-19 has significantly affected the consumption of bunker fuel. With the closure of international and domestic trade movements to curb the spread of the virus, the demand for bunker fuel is expected to decline during the pandemic.
- With the intervention of IMO, the share of very low sulfur fuel oil (VLSFO) is expected to increase, replacing high sulfur fuel oil in the forecast period.
- Low sulfur fuel oil and LNG are expected to create ample opportunities for the market players. Due to the increasing environmental concern, the demand for cleaner fuel is increasing.
- China is one of the largest exporters globally and is leading the market of bunker fuel market in the region. With the expected growth in trade, the nation is likely to continue its dominance during the forecast period.
Key Market Trends
VLSFO to Witness Significant Growth
- Marine fuel containing less than 0.5% of sulfur is generally termed as very-low sulfur fuel oil. From January 1, 2020, HSFO can only be used in ships having scrubbers installed to reduce the emissions, which will drive the demand of VLSFO.
- Most of the high-sulfur fuel oil (HSFO) bunker fuel market is expected to be shortly replaced by low-sulfur alternatives. Most of the VLSFO available in the market is blended from residual and distillate components, which are blended with various cutters of varying sulfur and viscosity to create an on-specification product.
- India is one of the major trading markets is witnessing continuous growth in the volume of goods being handled at ports. In 2019, the nation reported 1281 million metric tons of products through different ports. Post pandemic, the market is likely to boost the demand for VLSFO.
- In India, to meet the demand for VLSFO, Indian Oil Corp. stated its ambition to produce one million metric ton of IMO-complaint very low sulfur fuel oil in 2020.
- The demand for VLSFO declined after January 2020 due to global supply chain disruptions, a decrease in demand for general goods and products, lockdown implementation in most of the countries, and a global economic slowdown.
- The need for VLSFO is likely to recover significantly after mid-2021. Post-2020, the demand is expected to rise on account of the opening of all the trade routes and relative price rise.
China to Dominate the Market
- China is the biggest exporter and the second-largest importer of the goods by value. China’s major exports are mechanical and electric machinery and equipment, automotive products including vehicle parts, chemicals and plastics, iron and steel articles, and furniture, among others.
- From 2016-2018, the Chinses exports increased from USD 2.12 trillion to USD 2.5 trillion, driven primarily by an increase in imports from the US and Japan. Chinese exports to the United States and Japan increased by 23.6% and 13.74%, respectively, during 2016-2018.
- With the increasing demand for energy, especially in nations like China and India, trading for crude oil and natural gas is likely to get an increase over the forecast period, which in turn is expected to increase the demand for tankers.
- Despite a slight decline in the volume of goods handled by the river and coastal ports in 2019, China managed more than 13.5 billion metric tons of products. With large export and
- However, the fleet in the country is registering a situation of drastic slowdown and oversupply. During Q1 2020, the container volume at the major Chinese ports has declined by 8.9% compared to 2019. The most significant drop in the traffic was registered by the China-US route and China-Japan/South Korea route.
- Additionally, the trade tension began between the United States and China in 2018 due to the setting of high tariffs and other trade barriers, which is expected to restrain the market. Moreover, the COVID-19 is pushing the market downwards further, restraining the market growth.
The Asia-Pacific bunker fuel market is moderately fragmented. Some of the major companies include China COSCO Holdings Company Limited, Ocean Network Express Pte Ltd, Indian Oil Corporation Limited, Chimbusco Pan Nation Petro-Chemical Co., Ltd , BP Sinopec Marine Fuels Pte Ltd.
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