Northeast Asian bunker fuel traders this week were still mulling over the implications that US tariffs on steel and aluminum imports would have on the bunker fuel market, with most saying it was still too early to tell if regional bunker fuel volumes and trade would be affected on the back of any decrease in trade flows from Northeast Asia to the US.
Last week, US President Donald Trump signed off on previously announced tariffs on steel and aluminum imports, which will see the US implementing a 25% tariff on imports of steel and 10% on aluminum, effective March 23.
In Northeast Asia, South Korea, Japan and China are the biggest exporters of steel to the US. With the impending tariffs, bunker fuel sources said a concern would be whether vessel traffic would fall drastically due to a fall in US demand for steel from the affected countries which, in turn, might affect bunker fuel sales. So far however, bunker fuel traders have mostly taken a cautious tone with regard to the news, with many preferring to adopt a wait-and-see stance.
"Frankly speaking, I don't expect any impact yet ... the Japanese government is still trying to negotiate [exemptions] with the US, so we need to wait and see and I think in the short term, there is no impact," a Japan-based trader said Monday.
Others said with US-bound shipments making up a small percentage of Japan's total steel exports, any decrease would probably have minimal impact. "There would be almost no impact on bunker as Japan's steel exports [to the US] are not much," a Japan-based trader said Monday.
According to 2017 statistics from the Japan Iron and Steel Federation, Japan's total steel exports stood at 38.13 million mt, of which 1.87 million mt was exported to the US.
In South Korea, which is the biggest Northeast Asian steel exporting country to the US, opinions among traders were mixed.
"Some companies are worried, due to the tariffs, as they have a large portion of steel exports in South Korea," a South Korean trader said Monday. "On the bunker fuel side, it's hard to say at the moment as vessels going from South Korea to the US do not take only take bunkers here ... it will be a more widespread problem," he said.
Still, there were other South Korean traders who said they expected minimal impact for now.
"I don't see any big impact yet," a South Korea-based trader said Monday, adding that in any case, South Korean steel exports to the US have been on the decline. While this could not be confirmed for 2017, data from the International Trade Administration, an agency of the US Department of Commerce, showed that South Korea exported 30.3 million mt of steel in 2016. Of that, South Korea's steel exports to the US totaled 3.7 million mt, down 5.4% from 2015, making the US the second largest market for South Korean steel in 2016. According to the ITA, the US was South Korea's biggest export market for steel in 2015.
In terms of China's steel exports to the US, ITA data showed 2017 volumes at 0.8 million mt, steady from 2016.
INEVITABLE THAT BUNKER VOLUMES WILL TAKE A HIT
Still, some trade sources said this week bunker volumes will eventually be affected in the long term, should affected countries fail to receive exemptions from the tariffs.
"The side effect of the tariffs will be a decrease in bunker volumes, absolutely," a Japan-based trader said Tuesday.
"The volume of export cargoes from Asia to the US will decrease, and bunker volumes will go down, but by how much is the question," he said.
Still, traders said there remained a host of variables to take into account, which could offer some hope to the bunker fuel industry.
"Even though vessel traffic to the US may drop, but still, steel mills will need to export products -- no mill has yet announced a drop in production ratio, so if they keep at current production levels, they will have to find other export outlets," the Japan-based trader said, adding that potential falls in bunker fuel volumes might be minimized as steel-carrying vessels would not be left idle.
"My guess is though that it will be a two-pronged approach: steel mills will reduce operation rates, and they will have to find other export outlets, but it will not happen so fast," he said.
