Fuel Switch Snapshot: The year of fuel switching
LNG premiums over VLSFO soar
VLSFO prices drop in major ports
Bio-blends become slightly cheaper
CHART: The dots represent bunker fuel prices adjusted for calorific contents to become VLSFO-equivalents, with the estimated levels of EU ETS costs excluded from the prices. ENGINE, PRIMA Markets, NYMEX
Early in the year, VLSFO-equivalent prices for LNG in key ports like Singapore and Rotterdam were significantly lower than VLSFO, encouraging many dual-fuel tankers to opt for LNG. This trend was particularly evident in May, when the price difference incentivised fuel switching.
However, LNG’s cost advantage began to diminish towards the second half of the year as its price steadily climbed, even without the inclusion of estimated EU Allowances (EUAs). By September, some vessel owners began switching back to oil, with smaller LNG stems losing favour due to their higher delivery premiums compared to VLSFO.
The rising LNG prices made it one of the most expensive fuel options in the latter half of the year, and it briefly even surpassed the VLSFO-equivalent price of B24-VLSFO in both ports.
From the start of the Fuel Switch Snapshot reporting on 8 March through to 20 December 2024, the VLSFO-equivalent price of LNG in Rotterdam surged by $170/mt, while the VLSFO price declined by $73/mt. In Singapore, LNG’s price soared by $174/mt, while VLSFO dropped by $95/mt.
By year-end, LNG’s premiums over pure VLSFO reached $119/mt in Rotterdam and $127/mt in Singapore.
Rotterdam’s LNG price went from a $255/mt discount to its B24-VLSFO HBE on 8 March to a $44/mt discount in the past week. Similarly, Singapore's LNG price dropped from a $255/mt discount to a $4 discount.
In the biofuels market, the price of bio-VLSFO blends in Rotterdam and Singapore reached a rare convergence at $668/mt on 20 December.
Rotterdam’s biofuels, especially POMEME-based biofuels, benefit from Dutch HBE rebates. This typically makes them more affordable than UCOME-based biofuels, which do not qualify for rebates. Singapore’s bio-premium over VLSFO has increased by $10/mt to $123/mt, while Rotterdam’s has risen by $31/mt to $163/mt since the start of the reporting period. This change is primarily due to the decline in VLSFO prices.
A report from the International Energy Agency in October projected that bio-bunker prices are unlikely to decrease significantly beyond current levels by 2030. This is driven by strong demand for feedstocks in the road and aviation sectors, coupled with the high costs associated with alternatives like bio-methanol.
By Konica Bhatt
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