In early 2024, spot premiums for marine biofuel at Singapore, the world’s largest bunker hub, experienced a decline due to factors such as subdued demand, lower biofuel feedstock costs, and a stronger benchmark for residual fuel oil, Reuters reports.
According to Reuters, the marine biofuel market has witnessed growth in the past two years as shippers seek lower-carbon alternatives, but overall demand remains slow, with shippers engaging in sporadic trials and term contracts.
The B24 blend, the prevailing benchmark for marine biofuel, consists of 24% used cooking oil methyl ester (UCOME) and 76% very low sulfur fuel oil (VLSFO). The spot delivered premiums of B24 dropped to around $140 per metric ton over Singapore VLSFO quotes in January, down from previous levels of $145-$170 at the end of 2023 and over $200 in Q3 2023, Reuters informs.
The narrowing of the price spread this year is attributed to strengthened conventional VLSFO bunker prices, driven by increased demand due to shipping disruptions in the Red Sea.
Simultaneously, Asia UCOME prices have been capped since Q4 2023 due to slow demand and abundant supplies, along with a soft European market.
To remind, bunker sales of biofuel blends increased to 520,000 tonnes in 2023, which more than tripled from 140,000 tonnes in 2022. Meanwhile, industry experts and fuel suppliers expect that the positive trend will continue the next years.
