Asia Pacific to Emerge as Major Bunker Fuel Market: Strategic Location of Ports, Rising Consumerism Driving Growth

In marine fleet operations, the fuel that is loaded into a ship’s bunker and powers its engines is bunker fuel. Bunker fuel can be obtained as a distillate or residue of crude oil, with the latter accounting for a share of close to 75% in the global bunker fuel market in 2013. Intermediate fuel oils of grades IFO 180 and IFO 380, which are residual fuel oil types, are the most preferred due to their low cost and easy combustibility. Fuel oil, as bunker fuel is also known, is used in thermal plants, gas turbines, marine engines for transportation, electrical power applications etc. Over a period of time, due to the development of high-power diesel engines that run on fuel oil, today commercial shipping has become a major industry. The occupation has enabled trade between distantly located regions across the world for economic development.

Fuel Purchase Prices and Sulfur Emission Concerns Decide Viability of Marine Fleet Operations

For vessel and ship operators, bunker fuel costs make up almost 70% of the entire voyage expenses, which is why the purchase of the fuel at economical prices is essential. To obtain the best prices, fleet operators either prefer a single bunkering port or multiple ports en route for optimizing the purchase cost of bunker fuel.

Nevertheless, in recent years, bunker fuel has been subjected to sulfur emission regulations, thereby mandating marine fleet operators to use clean fuel grades. In particular, these stipulations are significant for regions that are identified as emission control areas (ECA) for reducing the implications of marine transportation activities on aquatic life and human health. For these reasons, middle distillate and low-sulfur fuels are increasingly being traded at major ports around the world.

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Strategic Location of Ports in APAC, Europe Proffers Expansion Avenues

In marine trade, the strategic location of ports in major trade waterways is important in many ways. Not only are these ports major hubs of trade activities, but they also receive attention from authorities for development of the necessary infrastructure. For these reasons, these ports have emerged as prime bunkering destinations as well. For example, the Port of Fujairah and the Port of Singapore are large bunkering stations where a sizeable share of trade in the global bunker fuel market is recorded. Thus, Asia Pacific is significantly important for the bunker fuel industry in the coming years. The region is also home to some of the world’s major commodity consumption centers, which require robust marine infrastructure for large volume trade through waterways.

In countries in the European Union, inland waterways are an important channel for freight transport and directly impact domestic distributive trade, international trade, and economic development. In these countries, some ports are junctions that connect inland waterways and have emerged as important trading routes. Consequently, large bunkering stations have developed in the proximity of these junctions across the continent. The Port of Gibraltar and the Port of Rotterdam have emerged as significant bunkering stations due to their proximity to port junctions.

In the supply of bunker fuel, large oil giants, small independent suppliers, and large independent bunker suppliers are the three major categories of companies involved in the business. In the bunker fuel industry, World Fuel Services Corporation and Chemoil Energy Limited are the two top oil companies that have bunkering services at all major ports in the world. Large corporations own their storage terminals and blending units at major ports – the major differentiator from small-sized corporations that deal in bunker fuel. On the contrary, small-sized companies operate from leased facilities due to financial constraints. Asia Pacific being recognized as the major region for the bunker fuel market, large companies are setting up bunkering facilities in the region.