Fuel utilized by shipping companies for fueling their marine fleet is commonly referred to as bunker fuel. Currently, fuel oil is the most widely used bunker fuel. However, apart from fuel oil, other middle distillate fuels are also utilized as bunker fuels. Bunker fuel costs account for approximately 70% of the total voyage expenditure for a vessel and ship operators prefer purchasing bunker fuel from ports where the cost is lower. Some operators prefer purchasing a major portion of the total fuel requirement for the voyage from a single port which offers bunker fuel at economical prices. However, this is not an industry-wide scenario as other operators may spread the total fuel purchase over numerous ports. The stringent sulfur emission standards, especially in Emission Control Areas (ECA), have gradually led shipping companies to adopt clean fuel grades. The middle distillate and low sulfur fuels are now being traded in all major ports of the world. Though marine fuel is traded at almost all ports around the world, a major volume of the overall trading activities are concentrated among a select number of ports. Ports that are strategically located along major transit routes have emerged as prime bunkering destinations. The Port of Singapore and Fujairah are large bunkering ports, which account for a significant share of the overall bunker fuel traded in the global market.
Asia Pacific is the most prominent market for the bunker fuel industry. The major commodity consumption centers in the world currently lie in the Asia Pacific region. The Singapore Port in Asia Pacific is currently the largest port in the world in terms of volumes of bunker fuel traded. Europe is home to some of the busiest trading routes in the world and the region houses numerous choke points, which have evolved into major trading routes. As a result, large bunkering ports have developed around these choke points across the region. Busy ports such as the Port of Rotterdam and the Port of Gibraltar have developed as highly attractive bunkering destinations owing to their presence near these choke points.
In the bunker industry, there are two primary kinds of fuels currently being used; distillate fuel and residual fuel. Among the two, residual fuel accounted for around 75% of global bunker consumption in 2013. The residual fuel oil segment comprises intermediate fuel oils (IFOs), among which IFO 380 and IFO 180 are the most preferred fuel grades. The IFO 380 fuel grade is relatively inexpensive compared to other bunker fuel grades, which are freely traded in the market. With majority of ship engines capable of combusting IFO 380, it is currently the most popular fuel grade in the bunker market. The IFO 380 grade is likely to exhibit moderate growth rates in demand during the forecast period.
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Currently, bulk and general cargo vessels account for a significant share of the overall bunker consumption. Cargo vessels generally require more time and manpower to carry out loading and unloading activities as compared to container vessels. As a result, container vessels are gradually substituting general cargo vessels in the global trade scenario. Owing to this substitution effect, general cargo vessels are likely to moderately lose out on market share to container vessels with respect to bunker consumption globally. Container vessels are likely to be the most attractive market segment for bunker consumption during the forecast period. Owing to the simplified loading and unloading procedures applicable for these vessels, they are being increasingly preferred over cargo vessels in major ports across the world. Tanker vessels also account for significant market share globally in terms of bunker fuel consumption. Major crude oil consumption and production centers such as Asia Pacific and the Middle East are expected to register a continuous increase in tanker trade throughout the forecast period.
Currently, bunker fuel is supplied in the global market by three seller categories: major oil companies, large independent bunker suppliers, and small independent bunker suppliers. Companies such as Chemoil Energy Limited and World Fuel Services Corporation offer bunkering services in all major ports of the world. On the other hand, companies such as Gazpromneft Marine Bunker LLC and Lukoil-Bunker LLC operate only in restricted regions. Leading independent distributors that own physical assets such as storage terminals and blending facilities in major bunkering ports have additional advantage over small independent distributors. The financially stable large distributors are in a better position to acquire these physical assets in large ports as compared to smaller distributors. With increasing demand for bunker fuel from developing regions of Asia Pacific, bunker supplying companies are expected to expand operations in major ports of this region.
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