This is a variety with both production and consumption. Domestic fuel oil is consumed at home, but not exported in general trade; International imported fuel oil is supplied by coastal bonded oil and does not come in. With the start of private refining and chemical industry, the export trade channel is expected to open. Will the prices of China 380 and Singapore 380 be competitive? With unlimited fuel, what investment opportunities will we have?
In this open class, we invited Bian Zhihao of Haitou Shipping (who worked in CSIC and had 8 years' experience in spot business of marine oil, and now he has switched to paper cargo business of fuel oil) to introduce us to the general situation, operation characteristics and price logic of fuel oil market, and to explore the possibility of future investment strategy.
main body
Good afternoon, everyone. I'm Bian Zhihao from Haitou Shipping. I am very glad to share some experience and knowledge about bonded oil with you when the bonded 380 fuel oil product was launched in the last issue. Today I am mainly divided into four parts. First of all, let me introduce you to what bonded fuel oil is. Secondly, I'll introduce you to several major markets. Third, the price transmission relationship and pricing path of fuel oil. Finally, there are some influencing factors of price and some trading opportunities.
The existing bonded oil used in the domestic market refers to the international offshore oil. The so-called bonded means that the import and sales links are exempted from customs duties, value-added tax and consumption tax, and oil products must be stored in bonded tanks of the customs. At present, there are mainly two kinds of bonded oil spot use in China, one is diesel oil and the other is fuel oil. Diesel oil is also called light oil in our industry, so this is relative to some fuel oils with relatively high density.
From the perspective of diesel, diesel can be divided into magnesium oxide and MDO. Compared with MGO, the quality of MDO is relatively poor and the density is relatively high. Singapore stopped supplying MDO from June 20 17. Only Japan in Asia still supplies MDO, which is about $ 100 to $ 150 cheaper than local MGO.
Commonly used marine fuel oil is divided into 180, 380, 500 and 700CST according to hardness and viscosity, and there are some smaller varieties, such as 80CST, 120CST, and some Iranian 280CST. According to the sulfur content, these varieties can be divided into HSFO, sometimes we call it HFO, followed by LSFO, which is a fuel oil with low sulfur content, and the last one is ULSFO, which we call ultra-low sulfur fuel oil.
Then the variety to be served this time actually corresponds to HSFO, and its requirements are that the kinematic viscosity at 50℃ is less than 380 and the sulfur content is less than 3.5%. We see that LSFO basically requires that the sulfur content is less than 1.0%, then ULSFO is generally less than 0. 1. I'll mention it here. Here you can see some other labeling methods of 380.
Then you may see that someone outside will write 380 as IFO, called international fuel oil, another named HFO, another named 380CST, and another named RMG380. So these labeling methods actually refer to the same variety, but the international standard is ISO-82 17. At present, the domestic bonded oil spot market refers to the version of 20 10. Some companies in Singapore will use the version of 20 15, and some companies will have the version of 20 10, depending on the different requirements of new and old companies.
The varieties listed in the last issue basically refer to the standard of 20 10 commonly used in China, and the sulfur content refers to the convention published by the International Maritime Organization (IMO) in 1973. Then our Chinese name is MARPOL Convention, which is called the International Convention for the Prevention of Pollution from Ships. According to this requirement, the sulfur content of 380 varieties was modified to 3.5%. As for other indicators of fuel oil, you can go to the website of the last issue for reference.
For the purpose of fuel oil, we only need to know that bonded 380 fuel oil is mainly used for international navigation ships, mainly for ship main engines. In some onshore power plants, refineries and steel mills, boilers will also use these fuel oils. One of my clients was very interesting that day. He asked me. He said he had a ship loaded with bonded oil. It's 380, but his ship is exported as goods. What do you mean? This ship was loaded on another ship and shipped out of the port as cargo. In other words, it's goods, not ships. Maybe he still has to drive himself after he leaves port. But he asked me if he could, and the answer was absolutely not. Our bonded oil is suitable for international ships. How do you prove that your ship is an international ship? First, you have to drive out. You have the next port of destination, and the ship's export procedures. Since it is exported in the form of goods, it means that the ship has no export procedures. So you have nothing now. That's definitely impossible. I won't let you add it. I give this example to tell you that the description in the rules is relatively simple, and it is called international navigation ship oil. In fact, its rules are very strict.
Ok, let's take a look at several international marine oil markets.
I have marked several big markets here, one is the Singapore market, and the other is the ARA region in Europe, namely Amsterdam, Rotterdam and Antwerp. We call it ARA area, which is a relatively developed area of offshore oil in Europe. Another area is Fujairah in the Middle East. Of course, I also marked China. China is developing very well now, and the supply of the whole market is increasing.
Speaking of China, there are currently ten bonded offshore oil companies in China. We can call it oligopoly or semi-closed market. The business license of bonded oil has passed through the Ministry of Commerce, the Ministry of Finance, the Ministry of Communications and the Customs, which we call four ministries. The approval process is very complicated and takes a long time. So far, there are only five national public welfare licenses, and the earliest one must be China Shipbuilding (600 150, Share Bar) Fuel Co., Ltd., which was established in 1972. After 35 years of exclusive operation and monopoly, in 2007, Sinopec Fuel Oil, Sinopec Chang Yan and Sinopec Zhonghai were approved. Another company, Guanghui Petroleum, is a private enterprise. These four companies have passed the approval, allowing them to supply bonded oil to the whole country.
20 17 with the establishment of Zhoushan free trade zone, five new local oil supply licenses were issued, allowing supply only in Zhoushan area. The approval process in Zhoushan area is much simpler than that in the past four ministries. Therefore, we can foresee that more enterprises may enter this market in the future. Maybe in the next few years, maybe Zhoushan is just the first step to open this market, and maybe this market will be more open in the future. Everyone first got the regional supply license of Zhoushan, and then promoted it to the whole country.
In contrast, it is easier to apply for a license in Singapore. Coupled with geographical advantages, we can see that there is a very big gap between the supply of the two countries. In 20 17, the total port supply in Singapore has exceeded 50 million tons, while that in China is only about100000 tons. You can apply for a license plate in Singapore as long as the materials are complete. Our name is MPA in Singapore, and he has a standard application approval process. Unless he thinks that you are involved in security issues, it may not be granted to you. Generally speaking, you can apply. In 20 17, there were 55 port supply qualification licenses in Singapore, and 58 in 20 16. In the past few years, when the market was booming, it reached more than 80, and it may be less in recent years. But it is still much more than domestic suppliers.
Let's take a look at the main fuel oil varieties and market data in Singapore. In recent years, the Singapore market is growing at a rate of about 5%~7%. In the first two years, from 20 12 to 20 14, we saw that the data was relatively stable. After 20 14, its data basically increased at a rate of 5%~7%. Compared with variety 380, we can see that the growth rate of variety 380 (the second column from the right) is relatively slow, not as fast as the total growth rate. The main reason is the result of large-scale shipping market, which leads to an increase in the demand for an oil with worse quality, cheaper price and higher viscosity. That's 500 from our last column. As you can see, the number of 500 is growing rapidly. When the numbers of 500 and 380 are added together, it will almost maintain the growth of 5%~7%, and the number of 700 is not listed here. In fact, there are 700 varieties with higher viscosity and quality. Comparatively speaking, many large container ships may use this inferior oil, and these varieties will increase by 5%~7% together.
After talking about the market, let's look at the price transmission relationship between fuel oil and crude oil, which we call the pricing principle. The deduction principle of Singapore market 380 comes from Brent crude oil. After a cracking price difference, let's tell you the ton-barrel ratio of Rotterdam fuel oil. Generally, our ton-barrel ratio is 6.35. Of course, someone will tell me that it is 6.5, so if the tons are different from the same period of last year, your cracking spread may be different from ours. When we get to Rotterdam Fuel, we will have something called EW, which is called the price difference between things. In fact, it is a price difference between Rotterdam in the west and Singapore in the east. By pushing this price difference down, we can deduce the price of a fuel oil in Singapore. Okay, this is one. This path is relatively clear and complete. Of course, there are other deductive ways. Let's look at the second line.
It is the same. Brent, too. Brent crude oil can extract Dubai crude oil from EFS crude oil. Then using this product, I said that one from the west is crude oil, and we directly deduced it into a crude oil from the Middle East. There is a product called 380CST in Arabian Gulf under Middle East crude oil, which is a fuel oil extracted from Dubai crude oil. After passing through this fuel in Arabian Gulf, we can also deduce this 380CST in Singapore through a cross-regional price difference between Arabian Gulf and Singapore. Well, the results of these two paths are actually from Brent to Singapore 380. In principle, the final generated prices should be exactly the same, that is, the prices between them can be mutually verified. The so-called intermediate products, including spread products and EFS products, are the targets that everyone can choose to trade, or a product that we arbitrage.
After deducting the price, let's talk about the pricing rules. First of all, I will focus on how the spot price comes from. Spot transactions in Singapore and China are very frequent and large, so the most important thing is to know how its spot benchmark comes from. This benchmark, called MOPS, is the average price in Singapore published by Platts. Then how did this average price come from? Generally speaking, we think this window time is from 4 pm to 4: 30 pm, and Singapore time, Beijing time and Singapore time are the same. But later we thought it was produced from 4 pm to 4: 30 pm. In fact, around 3: 30 pm, players began to enter the arena one after another. Then the quotation will start from the time specified by Platts. How do you call it a proposal? It will tell you where I think the buying price is today, or I want to sell it today. I think the price is that everyone can quote each other. Then after 4 o'clock, the price can be revised on the basis of the previous quotation. Then if you don't have an offer before 4 o'clock, I'm sorry, you can't modify it after 4 o'clock, and you are not eligible to participate. What do you mean? Even if you didn't sign up before 4 o'clock, I won't take you to play in the future. That's good. Around 4: 00, 15, all contracts for price difference, such as monthly price difference, east-west price difference and annual price difference, cannot be modified.
And all mops are called fixed prices or unilateral prices. This price can still be modified, and it can be changed to 4: 20. Then, whether it is a spread contract or a fixed price contract, the remaining 15 minutes, or 10 minutes, until 4: 30, is a Platts price collection process, and then around 4: 30, the window is closed, and Platts will make a statistic and calculate an average. Then the final accurate MOPS price will be announced between 6: 30 pm and 7: 30 pm. This price has become the basis for all suppliers (whether Singaporean, Japanese or Korean, including China, Thailand or Malaysian) to quote at night.
Q: What kind of oil does the offshore coal carrier use? What kind of oil is used for inland river transportation?
A: This has little to do with what goods are shipped. Both 120 and 180 oils are produced in China.