Bunker fuel, also known as heavy fuel oil (HFO) or marine fuel, is a type of fuel oil used aboard vessels. It is typically used in steamships and power vessels. Bunker fuel is composed of bottom sediment and residues from petroleum oil refining processes. It has a higher viscosity and density compared to other fuel oils due to its complex composition of hydrocarbons and other chemical compounds. Bunker fuel is consumed in large quantities as it is used as fuel for marine diesel engines and steam turbines to power ship engines and electrical generators.
The global bunker fuel market is estimated to be valued at US$ 120 billion in 2023 and is expected to exhibit a CAGR of 6.6% over the forecast period 2023 to 2030, as highlighted in a new report published by Coherent Market Insights.
Market Dynamics
Growing maritime trade is one of the primary drivers of the bunker fuel market. Approximately 90% of global trade is transported by sea. The volume of goods and raw materials transported internationally via ships has been steadily rising over the years due to growing international trade. As maritime transport forms the backbone of international trade, increased trading volumes imply higher demand for bunker fuel from container ships, bulk carriers, tankers, and other cargo and passenger ships. In 2021, total world seaborne trade volumes stood at over 11 billion tons, representing a growth of 3.5% compared to 2020 levels. This growth in maritime trade is expected to drive higher consumption of bunker fuel during the forecast period.
Additionally, the shift towards lower sulfur bunker fuels to comply with stringent sulfur cap regulations will support the market growth over the coming years. The International Maritime Organization (IMO) has capped the global sulfur content in bunker fuel at 0.5% since January 2020, down from 3.5%, to significantly reduce pollution and emissions from ships. This has prompted vessel operators and oil refiners to produce and use lower sulfur compliant bunker fuels. The growing demand to meet new regulations will aid the expansion of the bunker fuel market during the forecast period.
Segment Analysis
The bunker fuel market is dominated by the shipping industry sub-segment. Around 60% of total bunker fuel consumption is accounted for by ships engaged in international trade and transport of goods across borders via sea routes. Shipping remains the most cost effective mode of trade globally, therefore demand from container ships, tankers, bulk carriers and other cargo ships ensures steady sales of bunker fuels.
PEST Analysis
Political: Regulations pertaining to sulphur emissions from ships are becoming more stringent over time. This is pushing ship operators and bunker suppliers to develop and offer cleaner and greener marine fuels going forward.
Economic: International trade and globalization has boosted sea-borne cargo volumes over the past few decades. Strong GDP growth in emerging economies has increased demand for raw materials and finished goods, benefitting the shipping industry.
Social: As environmental concerns rise, ship owners prefer fuels that reduce local air and water pollution during refueling at ports. This fuels a shift towards alternatives like LNG as bunker fuel in the long run.
Technological: New engine designs and emissions control systems allow use of fuels with lower sulphur content. Suppliers are also exploring options such as bio-bunker fuels and hydrogen fuels cells to power ships in the future.
Key Takeaways
The Global Bunker Fuel Market Demand is expected to witness high growth over the forecast period of 2023 to 2030 driven by expanding trade volumes. The global bunker fuel market is estimated to be valued at US$ 120 billion in 2023 and is expected to exhibit a CAGR of 6.6% over the forecast period 2023 to 2030.
The Asia Pacific region dominated bunker fuel consumption in 2023 due to large shipping fleets and trading hubs located in countries such as China, Singapore, South Korea and Japan. China alone accounted for over 20% of global bunker fuel demand in 2023.
Key players operating in the bunker fuel market are Shell International Petroleum Company, ExxonMobil, BP, Chevron and Total. Rising environmental awareness is prompting ship operators to increasingly adopt lower sulphur fuels and alternatives like liquefied natural gas, positioning companies investing in these cleaner options for growth. Strict compliance with emerging IMO regulations on maritime emissions will also influence future bunker fuel choices.