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Bunker price trends in Latin America

Lucretia Cardenas, Team Leader June 12, 2013

Overview

• Introduction • An overview of low-sulfur premiums and availability

in Latin America • Benchmark Panama bunker spreads narrowing

relationship to resupply • Shifting sands in Latin America bunkers markets

2

Low-sulfur Bunkers and Latin America


Low-Sulfur bunkers and Latin America

• Countries supplying low-sulfur bunker fuel include: – Panama – Chile – Argentina (only has LSFO due to crude) – Colombia – Brazil – Venezuela

4

Low-Sulfur bunkers and Latin America

• Premiums seen recently – Panama: $70-80/mt (down from $125/mt in August 2012) – Chile – Valparaiso: ~$125/mt (began offering in Fall) – Colombia – Cartagena: ~$120/mt (began offering in

August) – Brazil - $8/mt (low premium due to more low-sulfur

available than high-sulfur, similar to Buenos Aires) – Venezuela - +$200/mt (began offering in November)

5

Panama Bunkers and Resupply


Panama bunkers and resupply

7 Source: EIA


• Demand has been lower than normal this year due to global dynamics

• Limited demand relative to resupply during Q1 and into Q2 caused suppliers to be more competitive

• Panama suppliers say they need $30-40/mt bunker premium to Houston to cover costs, buyers say $20-30/mt

8 Source: Platts


• In February, total bunkers sold was up but the number of ships bunkering was down - Panama Maritime Authority

• US fuel oil exports to Panama down 850,000 barrels in March - EIA

– Market sources suggest combination of lower demand and competition from other countries supplies

– Also, storage was full in February and demand was not great

– IFO 380, was assessed at its narrowest premium this year to the US Gulf Coast 3%S fuel oil wholesale on March 18, at a $7.84/mt premium

9


10

$0.00

$10.00

$20.00

$30.00

$40.00

$50.00

$60.00

$70.00

1-Oct-12 1-Nov-12 1-Dec-12 1-Jan-13 1-Feb-13 1-Mar-13 1-Apr-13 1-May-13

Houston 3% Fuel Oil - Panama 3.5% IFO 380 ($/mt)

Source: Platts

Montevideo and Buenos Aires bunkers


Montevideo and Buenos Aires

• Argentina is selling some of the cheapest low-sulfur bunker fuel in the world as a result of the country's export tax and the residual fuel it produces

• The price has averaged nearly a $100/mt discount to bunker fuel in nearby Montevideo, Uruguay, during the past year

• This is despite the bunker fuel being sold in Buenos Aires having a sulfur level of 0.7% compared to Uruguay remaining at 3%

12

Montevideo and Buenos Aires

13

$500.00

$550.00

$600.00

$650.00

$700.00

$750.00

$800.00

1-Aug-12 1-Sep-12 1-Oct-12 1-Nov-12 1-Dec-12 1-Jan-13 1-Feb-13 1-Mar-13 1-Apr-13 1-May-13

Montevideo Buenos Aires

IFO 380

Source: Platts

Valparaiso and El Callao bunkers


Valparaiso and El Callao

• Another development during Q1 and Q2 is the inversion of the relationship between bunker prices in Chile compared to Peru

• In early March, a large amount of supply in Chile and a decrease in demand has forced suppliers to lower bunker prices – Only lasted a week due to ENAP export

• Inversion occurs again in May on poor weather, lasting several weeks – Swells keep resupply from getting to El Callao – Swells cause port and terminal closures in Valparaiso

15

Valparaiso and El Callao

16

-20

-10

0

10

20

30

40

50

IFO 380 Valpraiso-El Callao ($/mt)

Source: Platts

Colombia MGO


Colombia diesel tax and MGO

• The government implemented additional taxes on the sale of certain petroleum products, including diesel marine, in January

• The marine diesel tax rose $1.050/gallon - Colombia’s National Aceite

Combustible para Motores Tax law.

• The tax resulted in a significant jump in bunker prices – “If they are going to charge us 20%, we’re not going to

suck up 20%,” a bunker source said at the time – Bunker prices jumped initially and continued to increase as

more suppliers moved prices up with the tax

18

Colombia diesel tax and MGO

19

$800

$850

$900

$950

$1,000

$1,050

$1,100

$1,150

$1,200

$1,250

$1,300

Cartagena MGO

Conclusion


In Conclusion

• Keeping watch of Panama bunker prices relative to resupply costs – other ways to cover costs?

• Continue to monitor the relationship of 1%S and 3.5% sulfur in Latin America

• Tracking global port relationships to see if that tells us about any shift in demand

21

Questions/Comments

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Bunker price trends in Latin America - platts.com · Bunker price trends in Latin America . Montevideo and Buenos Aires • Argentina is selling some of the cheapest low-sulfur ...

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