Bunker Market Faces Challenging Future: 2050 Marine Energy
Tight margins, alternative fuel headwinds and increased competition for bunker volumes are just some of the challenges facing the current and future bunker market, according to Adrian Tolson, principal of 2050 Marine Energy.
OPIS caught up with Tolson to expand on his presentation at the recently held Maritime Week of the Americas in Tampa. The long-time bunker industry player laid out the hard reality of the global bunker market.
One of Tolson’s main themes is the decline in bunker margins, which he said is indicated by financial reporting from Bunker Holdings, World Fuel Services and Monjasa, three major bunker suppliers/traders.
While the bunker business has always been a low-margin endeavor, he pointed to Bunker Holdings’ pre-tax net margin dropping to about break even in 2024, which came with some exceptional write offs, from roughly $9/mt in 2023. Monjasa’s margins dropped to $10/mt in 2024 after being around $20/mt in 2023. World Fuels has been a bit steadier, showing a margin of some $5/mt 2023 and $4.75/mt in 2024.
As Tolson explained, “Peak margin performance for the industry started in 2019 with the runup to IMO 2020 and continued with the Covid and Ukrainian war disruptions. Industry margins are now returning to a more normal, tighter margin pattern and anecdotally 2025 looks to be worse than 2024.”
Tolson pointed to obvious margin issues in the U.S. Gulf Coast, where Houston bulk VLSFO has consistently traded at a premium to retail bunkers, according to the OPIS Global Marine Fuels Report. That dynamic is atypical of the traditional bunker market structure. He attributed this inversion of pricing to serval factors, including:
–Different specifications for finished bunker fuel compared to 20 API bulk VLSFO.
–Too many suppliers in the Texas market.
“Houston and the surrounding area has 12 suppliers (soon to be 13) competing both onshore and offshore for about 4.6 million metrics tons per year—supplier market shares will have to fall and will lead to losses,” noted Tolson.
Decline in Demand?
Industry talk of disappearing demand may not be as accurate as many think, Tolson said.
He pointed out that only a few ports worldwide report actual official demand figures, which do not show any consistent declines.
“No one is recording data in supply locations such as Texas, so demand is what it is perceived to be by individual suppliers and traders. For suppliers, term contract deals have increased as alternative fuels relationships develop, and this takes spot demand off the spot market leading to a feeling there is less activity. … Bunker traders are also impacted with bunker inquiry demand consistently lost to buyers purchasing pools (e.g., Seascale Energy) in recent years” he said.
Alternative Fuels Face Headwinds
Tolson argues that the global decarbonization movement has slowed in 2025. This slowdown comes at the same time as European regulatory ambition pulling back. In the U.S., a new administration appears to be unclear on a decarbonization stance and renewable credits.
And Asia has slowed its decarbonization efforts because of Europe and U.S. headwinds and the absence of strong local support from shipping and financiers.
One bright spot for global decarbonization is the International Maritime Organization’s Marine Environment Protection Committee, or MPEC 83, which has measures before it that include a new fuel standard for ships and a global pricing mechanism for emissions. These measures, set to be formally adopted in October 2025 before entry into force in 2027, will become mandatory for large ocean-going ships over 5,000 gross tons, which emit 85% of the total CO2 emissions from international shipping.
But even with the MEPC 83 regulations, Tolson predicts the shipping industry could face serious challenges to getting near the goal of net zero by 2050. Among his other observations:
–LNG will continue to be one of the hottest fuels long into the future, with bio-LNG and onboard carbon capture helping the cause.
–Green hydrogen-based fuels will disappoint because shipping will fail to commit until the last moment and supply infrastructure providers without shipping support will fail to get to FID. MEPC83 helps, but the path is not aggressive enough as yet, and much-needed local and national government support will most likely fail to step in.
–Oil products will continue to supply 55% of marine energy demand in 2050, while LNG will supply 13%, biofuels 9%, methanol 12.5% and ammonia 7.5%.
Tolson predicts that even up to 2035, traditional oil products will represent more than 75% of supplied bunkers. And surprisingly, HSFO, which several years ago was talked of as an antiquated dinosaur fuel, continues to play a critical role in today’s market. Demand for the product is most likely not dropping until well into the next decade.
–Reporting by Tom Sosnowski, tsosnowski@opisnet.com; Editing by Eric Wieser, ewieser@opisnet.com and Michael Kelly, mkelly@opisnet.com
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