A rare window of opportunity has opened up for shipowners to buy domestic bunker fuel for delivery at Japan's Tokyo Bay as prices are significantly lower than for bonded fuel, local sources said Friday. But some traders said that the window was fast closing with supply heard to be tightening due to several deals done over the last few days.
"I heard a buyer tried to buy domestic bunker fuel [180 CST grade] last night but availability is tight on domestic products now ... The buyer wanted a few hundred metric tons but the supplier couldn't meet the requirement, so I think soon it will not be workable to buy from the domestic market, not for this month," a trader said.
"Usually in the domestic market, it's more expensive than bonded because you also have to pay tax, but now, even with tax included, it is cheaper than the bonded price," a trader said Thursday.
Other traders said Friday that there was still enough supply available in the domestic market.
Traders said 180 CST bunker fuel, gasoil, diesel, high sulfur diesel, and low sulfur diesel are some of the products available in the Japanese domestic market.
While 380 CST bunker fuel is only available for sale in the bonded market, this has not stopped regular buyers of bonded fuel from purchasing the lower viscosity bunker fuel domestically.
Bonded bunker fuel is exempt from import tax and can be sold only to ships plying international routes, but traders said domestic bunker fuel can be sold to ocean-going vessels.
Sources estimated that domestic bunker fuel prices are usually around $30/mt higher due to taxes.
"But at this moment, we can see two factors contributing to this: firstly, a weak Japanese Yen which when we convert to dollars makes it [bunker fuel] very cheap; and secondly, the domestic market tends to be less affected by movements in crude oil, so even though crude prices may rise, the rise is slower in the bunker fuel market," the source said.
Market participants said that the last time domestic bunker fuel prices were lower than bonded fuel was around six months to a year ago.
"It's very rare that this happens, the last time I can recall this happening was maybe last winter," a trader said Friday.
Currently, market participants estimate domestic 180 CST bunker fuel prices at $15-20/mt lower than bonded fuel.
"Domestic prices for 180 CST bunker fuel are below $350/mt at the moment," a source said.
At the Asian close Thursday, S&P Global Platts assessed bonded 380 CST and 180 CST bunker fuel for delivery at Tokyo Bay at $361/mt and $368.50/mt, respectively.
