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Taiwan's Formosa Plastics Marine seeks extended bunker term deal ahead of IMO 2020 rule

Increase font size  Decrease font size Date:2018-06-26   Views:469
Taiwan's Formosa Plastics Marine Corporation is seeking an 18-month term contract for the purchase of bunker fuel from Hong Kong over July 2018-December 2019, instead of its usual 12-month term, ahead of the IMO 2020 ruling, trade sources said Friday.

This is the first time that the Taiwanese shipper is seeking a term tender that runs over 18 months, they added.

Formosa's 18-month contract reflects an effort on the shipper's part to secure term volumes ahead of 2020, when the International Maritime Organization's 0.5% global sulfur cap rule takes effect, the sources said.

"This way, they won't have to worry about tendering [for bunker fuel] for the remaining six months leading up to 2020," a trader said.

The tender, which closes Friday, seeks 15,000-45,000 mt of 380 CST bunker fuel and 1,500-4,500 mt of low sulfur marine gasoil for lifting from Hong Kong, traders said. The 380 CST bunker fuel portion, with sulfur at a maximum of 3.5%, will be priced against the Platts Bunkerwire 380 CST bunker fuel delivered Hong Kong assessments, while the LSMGO, with sulfur at a maximum of 0.1%, will be priced against Platts Bunkerwire LSMGO delivered Hong Kong assessments.

The previous term contract, for Formosa's July 2017-June 2018 bunker fuel supplies, for lifting from Hong Kong, was reported to be awarded to World Fuel Services. But this could not be confirmed with both parties. Trade sources said the term deal was concluded at a mid-single digit discount to the Platts Bunkerwire Hong Kong 380 CST bunker fuel assessment.

Formosa could not be reached for comment Friday morning while WFS declined to comment.

Market participants expect keen competition for Formosa's term tender.

"It's high stakes -- if you fix with them, it's 1.5 years of regular business, if you don't fix, then it's goodbye for 1.5 years," a trader said late Thursday.

"We expect it to be more competitive, there is a feeling that market demand this year is weaker than last year, so many sellers would be very keen on it [Formosa's tender]," another source said Friday.

Other market participants, however, said term contract pricing would present difficulties.

"Sellers will always say supplies are subject to cargo availabilities, no one will guarantee," a trade source said.

"It's going to be hard to predict the price changes for bunker fuel ahead of the spec change in 2020, especially for Q3 and Q4 of 2019."
 
 
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