The increase in ship fuel prices by 77% since the start of the Iran war on February 28 has significantly impacted maritime transportation costs. In assessments conducted in Singapore, the price of VLSFO (very low sulfur fuel oil) reached $509 per ton on February 27, and the price of high sulfur fuel oil (HSFO) was $432 per ton. However, by Monday of this week, the price of VLSFO had risen to $886 and HSFO to $764.
Impact of the War on Prices
For ship owners, securing 1,000 tons of fuel means an increase in costs of about $377,000 for VLSFO compared to pre-war days. The cost of a 3,000-ton shipment has also increased by more than $1.1 million. Prices surged sharply after the U.S. and Israeli attacks on Iran on February 28 and the disruptions caused in the Strait of Hormuz. Data from Ship & Bunker shows that the price of VLSFO in Singapore rose from $521.50 per ton before the war to a peak of $1,120.50 by March 13.
Changes in the Supply Chain
After this peak, the market gradually returned to normal, but fuel prices have never returned to pre-war levels and have increased again in recent weeks. This price increase has also led to changes in the economics of ship fuel consumption. In Singapore, the price difference that ships equipped with scrubber systems benefit from HSFO has increased from about $77 per ton before the war to $122 currently.
Another risk for ship owners is whether the appropriate fuel is available at desired ports. The Iran war and disruptions in the Strait of Hormuz have repeatedly pressured fuel supply to Asia and the Middle East, forcing ships to refuel earlier, carry more fuel, or divert to alternative hubs. In Singapore, the time to supply VLSFO has increased to double digits, while in Fujairah, at times, the effective inventory of VLSFO has reached a minimum, with only a few suppliers able to provide the product.
This issue is not limited to the two mentioned supply centers. Inventory shortages in Japan, longer lead times in Northern Europe, and limited supply in the Middle East have all been observed this year. Low inventories indicate that the market remains vulnerable to further disruptions.
More than seven months have passed since the start of the war, and fuel prices clearly tell a similar story to freight rates: the initial shock has passed, but the costs resulting from disruptions remain in the shipping industry.
Read more: Panama Canal expands long-term capacity allocation plan to Panamax locks · Sanctions on tankers in the Strait of Hormuz following two maritime incidents
