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© 2013 Platts, McGraw Hill Financial. All rights reserved.
Bunker price trends in Latin America
Lucretia Cardenas, Team Leader June 12, 2013
Overview
• Introduction • An overview of low-sulfur premiums and availability
in Latin America • Benchmark Panama bunker spreads narrowing
relationship to resupply • Shifting sands in Latin America bunkers markets
2
Low-sulfur Bunkers and Latin America
Bunker price trends in Latin America
Low-Sulfur bunkers and Latin America
• Countries supplying low-sulfur bunker fuel include: – Panama – Chile – Argentina (only has LSFO due to crude) – Colombia – Brazil – Venezuela
4
Low-Sulfur bunkers and Latin America
• Premiums seen recently – Panama: $70-80/mt (down from $125/mt in August 2012) – Chile – Valparaiso: ~$125/mt (began offering in Fall) – Colombia – Cartagena: ~$120/mt (began offering in
August) – Brazil - $8/mt (low premium due to more low-sulfur
available than high-sulfur, similar to Buenos Aires) – Venezuela - +$200/mt (began offering in November)
5
Panama Bunkers and Resupply
Bunker price trends in Latin America
Panama bunkers and resupply
7 Source: EIA
Panama bunkers and resupply
• Demand has been lower than normal this year due to global dynamics
• Limited demand relative to resupply during Q1 and into Q2 caused suppliers to be more competitive
• Panama suppliers say they need $30-40/mt bunker premium to Houston to cover costs, buyers say $20-30/mt
8 Source: Platts
Panama bunkers and resupply
• In February, total bunkers sold was up but the number of ships bunkering was down - Panama Maritime Authority
• US fuel oil exports to Panama down 850,000 barrels in March - EIA
– Market sources suggest combination of lower demand and competition from other countries supplies
– Also, storage was full in February and demand was not great
– IFO 380, was assessed at its narrowest premium this year to the US Gulf Coast 3%S fuel oil wholesale on March 18, at a $7.84/mt premium
9
Panama bunkers and resupply
10
$0.00
$10.00
$20.00
$30.00
$40.00
$50.00
$60.00
$70.00
1-Oct-12 1-Nov-12 1-Dec-12 1-Jan-13 1-Feb-13 1-Mar-13 1-Apr-13 1-May-13
Houston 3% Fuel Oil - Panama 3.5% IFO 380 ($/mt)
Source: Platts
Montevideo and Buenos Aires bunkers
Bunker price trends in Latin America
Montevideo and Buenos Aires
• Argentina is selling some of the cheapest low-sulfur bunker fuel in the world as a result of the country's export tax and the residual fuel it produces
• The price has averaged nearly a $100/mt discount to bunker fuel in nearby Montevideo, Uruguay, during the past year
• This is despite the bunker fuel being sold in Buenos Aires having a sulfur level of 0.7% compared to Uruguay remaining at 3%
12
Montevideo and Buenos Aires
13
$500.00
$550.00
$600.00
$650.00
$700.00
$750.00
$800.00
1-Aug-12 1-Sep-12 1-Oct-12 1-Nov-12 1-Dec-12 1-Jan-13 1-Feb-13 1-Mar-13 1-Apr-13 1-May-13
Montevideo Buenos Aires
IFO 380
Source: Platts
Valparaiso and El Callao bunkers
Bunker price trends in Latin America
Valparaiso and El Callao
• Another development during Q1 and Q2 is the inversion of the relationship between bunker prices in Chile compared to Peru
• In early March, a large amount of supply in Chile and a decrease in demand has forced suppliers to lower bunker prices – Only lasted a week due to ENAP export
• Inversion occurs again in May on poor weather, lasting several weeks – Swells keep resupply from getting to El Callao – Swells cause port and terminal closures in Valparaiso
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Valparaiso and El Callao
16
-20
-10
0
10
20
30
40
50
IFO 380 Valpraiso-El Callao ($/mt)
Source: Platts
Colombia MGO
Bunker price trends in Latin America
Colombia diesel tax and MGO
• The government implemented additional taxes on the sale of certain petroleum products, including diesel marine, in January
• The marine diesel tax rose $1.050/gallon - Colombia’s National Aceite
Combustible para Motores Tax law.
• The tax resulted in a significant jump in bunker prices – “If they are going to charge us 20%, we’re not going to
suck up 20%,” a bunker source said at the time – Bunker prices jumped initially and continued to increase as
more suppliers moved prices up with the tax
18
Colombia diesel tax and MGO
19
$800
$850
$900
$950
$1,000
$1,050
$1,100
$1,150
$1,200
$1,250
$1,300
Cartagena MGO
Conclusion
Bunker price trends in Latin America
In Conclusion
• Keeping watch of Panama bunker prices relative to resupply costs – other ways to cover costs?
• Continue to monitor the relationship of 1%S and 3.5% sulfur in Latin America
• Tracking global port relationships to see if that tells us about any shift in demand
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