The Brewing Storms in the Bunker Market
Seasoned bunker industry expert, Robin Meech, has forecasted ominous clouds over the Mediterranean market. Recent industry transformations and heightened competition, particularly from Egypt, are likely to threaten the tight-knit equilibrium of the Mediterranean marine fuel supply. Meech, serving at the helm of Marine and Energy Consulting Ltd, anticipates that the advent of Mediterranean Emission Control Areas (ECA), international interest in Egypt’s market, and updated European audits, are major concerns on the horizon.
The Mediterranean’s impending 0.1% sulfur limit, set to take effect from May 2025, will compel ships operating therein to either adopt 0.1% sulfur fuels, install scrubbers, or consider alternative fuels such as Liquefied Natural Gas (LNG). These changes inevitably pose significant challenges for the Mediterranean bunker industry.
Challenging Frontiers: The Entry of Major Ports
Strategic entry points like Gibraltar, Tangier Med, Port Said, and Suez, are projected to witness a significant shift. Ships traversing the Mediterranean could potentially refill their tanks at these ports. This move could shrink the bunker market within the Mediterranean, altering traditional supply chains and demand dynamics.
Egypt is gradually becoming a considerable adversary for European bunker ports in the Mediterranean by offering more competitive prices. When compared with Valetta’s average Very Low Sulfur Fuel Oil (VLSFO) price in June, which was $556/mt, Suez offered an average of $664/mt. This price shift can significantly alter supply patterns in the region.
EU Energy Taxation Directive: A Growing Concern
Meech also sheds light on the European Union’s Energy Taxation Directive, a largely overlooked part of the ‘Fit for 55’ decarbonization initiative. The proposed change seeks to remove tax exemptions on aviation and marine fuels. Meech suggests that this could result in price hikes of up to $50/mt, potentially making European Economic Area (EEA) port bunker prices less competitive.
This shift could even make ships operating mostly within EEA visit nearby non-EEA ports to stock bunkers if the price difference is favorable. If implemented, ports close to EEA waters offering a competitive bunker-only option might stand to gain.
Climate Regulations: The Final Blow?
The final concern that Meech flags is the inclusion of the maritime industry into the EU’s emissions trading system. As per this regulation, cargo and passenger vessels over 5,000 GT will be required to purchase emissions allowances for the greenhouse gases they emit from bunkering.
This change is set to considerably affect trading patterns and could potentially turn non-EU ports into transshipment centers for larger vessels. This, Meech warns, will further hit Mediterranean bunkering businesses by reducing port calls and potential bunker sales.
Navigating this storm means acknowledging the shifting currents in the market. With expert voices like Meech sounding the alarm, it is clear that the Mediterranean bunker industry needs to brace itself for the bumpy ride that lies ahead.
Jack Jordan, the Managing Editor of the highly esteemed, Ship & Bunker, echoed these sentiments in his comprehensive report on the proposed regulations and their potential impact. The report serves as the definitive guide to the coming disruptions in the marine fuel market.
