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In the first half of the year, international marine fuel prices rose by nearly 30% year-on-year, but even so, as OOCL pointed out, compared with the previous oil price of more than 600 US dollars / ton, the current oil price has not yet recovered.

As for the domestic market, Longzhong Information, which has long studied oil price trends, said that the price of oil rose by 69% during the year, so it is still the price of non-stop ship burning.

Ship burning price rises and eats profits

In the semi-annual report, almost all listed shipping companies mentioned the reality that oil prices have eroded profits. COSCO Haikong said that the average unit price of Singapore's 380CST fuel oil in the first half of the year rose sharply by 28.1% year-on-year, which aggravated the cost pressure of shipping companies. In the first half of the year, the cost of COSCO Shipping and related businesses was 40.448 billion yuan, an increase of 1.775 billion yuan, an increase of 4.59%. The average single-box shipping cost decreased by 3.66% year-on-year. The average single-box shipping cost after fuel costs were reduced by 6.76%. It can be seen that the price of oil dragged down its cost by 3.1 percentage points.

OOCL International said that fuel oil costs rebounded significantly in the first half of the year compared to the same period in 2017. In June 2018, Singapore's 380 fuel oil per ton was about 50% higher than the same period in 2017. Although the freight and cargo volume have improved, the pace is not enough, and the overall performance during the year will be significantly affected by the oil price. However, compared with the past oil prices often exceed the level of 600 US dollars / ton, the current oil prices have not yet recovered.

China Merchants Steamship said that the international marine fuel price increased sharply in the first half of the year, and the cost of shipping companies' voyages increased significantly. Far East's main fuel port Singapore IFO380 average price of 376.7 US dollars / ton in the first quarter, the average price in the second quarter was 426.8 US dollars / ton, much higher than the same period in 2017 of 318.3 US dollars / ton and 313.6 US dollars / ton.

Sinotrans Shipping said that the operating cost of the container transportation in the first half of the year was US$ 260.39 million (compared with USD 243.39 million in the same period in 2017). The increase in operating costs in 2018 was due to an increase in shipping costs and fuel prices, resulting in a 18.4% increase in voyage costs.

Haifeng International said that the cost of marine fuel consumed in the first half of the year was US$ 88.074 million (compared with US$ 72.765 million in the same period in 2017). The cost of sales of Haifeng International increased by 8.1% from US$532 million at the end of June 2017 to US$575 million at the end of June 2018, mainly due to the increase in marine fuel costs and equipment and freight transportation costs for the container and extended logistics operations.

Ship fuel price rose 69% during the year

The rise in international oil prices will inevitably lead to an increase in domestic ship burning prices. In the long-term research related field, Longzhong Information, Tian Qiuqiu, pointed out that the domestic ship burning market price has reached the highest level since mid-May 2012.

Tian Qiuyu introduced that as of September 10, the domestic ship burning price exceeded 5,500 yuan / ton, and the high turnover even reached 5,650 yuan / ton, an increase of 6.6% from the beginning of September, an increase of 69% compared with the beginning of 2018.

As for the reason for the rising domestic fuel price, Tian Qiuyi still summarized it as the three “factors” of consumption tax, raw material price and environmental protection, which is exactly the same as the analysis of the in-depth report of the “Bus Trading Bulletin” in May. .

As far as the consumption tax is concerned, according to Tian Qiuqi, the current price difference between the bare and duty-paid products of the ship's fuel products is around 1,350 yuan/ton, and the high cost of the tax ticket is the primary factor, which has caused the ship's burning price to open up the road of six years.

As far as the price of raw materials is concerned, the international crude oil price pushes up and the domestic refined oil prices continue to rise, driving the price of asphalt and residual oil to rise. The main procurement cost of raw materials for ship fueling is obviously rising, and the price of asphalt products is about 50% during the year. The water oil and shale oil also showed upward performance of 39%, 31% and 22% respectively.

The environmental protection factors are mainly reflected in the oil reduction and adjustment of coal and water-based coal-based raw materials by oil adjusters. Due to the impact of national environmental protection policies, supply chain shortages frequently occur.

It can be seen that in addition to the fact that the rise in international oil prices has driven domestic ship fuel prices to be uncontrollable factors, other factors such as consumption tax and environmental protection are internal contradictions and controllable factors.

Ship fuel prices will continue to rise within two years

As for the reason for the rise in international oil prices, the most important factor is the geopolitical factors in the Middle East. Since the US announced its withdrawal from the Iranian nuclear deal in May, international oil prices have started to rise

Currently, WTI prices have risen to their highest point since November 2014, and Brent prices have recently reached a new high of $80/barrel. These continued high prices reflect multiple concerns about supply.

The United States has made it clear that it is the most likely to reduce Iran’s exports, which means that the load will drop significantly by more than 1.2 million barrels per day compared to the previous sanctions period. Compared with the higher level of crude oil exports in May, Iran’s crude oil exports fell by 230,000 barrels per day in June due to a 50% drop in European purchases. Most Iranian crude oil is exported to Asia, and China and India currently import 600,000 barrels per day.

Since the US Energy Agency issued a report in June, OPEC oil ministers met with 10 non-OPEC oil ministers and promised 100% compliance with the Vienna agreement (ie increase production). The details of the scale and time in the official gazette are less accountable, but the giant producers, especially Saudi Arabia and its Gulf allies and Russia, have begun to show signs of rising production volumes. This decision has ensured that the global market is maintaining a stable supply in the face of many oil challenges. High supply may mean a fall in oil prices in the future, but in fact, at the expense of the global idle capacity buffer, these idle capacity may be pulled to the limit.

At present, there are no signs of high yields that are useful elsewhere to alleviate market tensions. In fact, in the US Energy Agency's report, the US Energy Agency's overall growth forecast for non-OPEC oil production in 2018 has slightly decreased to 1.97 million barrels per day, while the US Energy Agency estimates that this production data for 2019 will be Up to 1.84 million barrels per day. On the demand side, the US Energy Agency still believes that demand growth in both 2018 and 2019 is 1.4 million barrels per day. It can be seen that in the current situation of rising and falling supply and demand, the future oil price will continue to rise in a period of time (at least in 2018-2019).

Of course, in the long run, with the emergence of alternative energy sources, the geopolitical factors such as geopolitics in the Middle East will gradually decline, and the world energy pattern will eventually change.

Source: Shipping Transactions Bulletin