Very Low Sulfur Fuel Oil (VLSFO) Market Size, Share & Industry Analysis, By Application (Container, Bulk Carrier, Oil Tanker, General Cargo, and Others), and Regional Forecast, 2024-2032

The global Very Low Sulfur Fuel Oil (VLSFO) market size was valued at USD 82.96 billion in 2023. The market is projected to grow from USD 87.22 billion in 2024 to USD 137.44 billion by 2032, recording a CAGR of 5.85% during the forecast period.

Very Low Sulfur Fuel Oil (VLSFO) is a type of marine fuel that contains a significantly reduced amount of sulfur compared to traditional high-sulfur fuel oils. It is a light fuel oil, with the sulfur content not exceeding 0.50% sulfur cap and has a maximum viscosity of 80 centistokes (cSt) at over 50°C. It is designed to comply with regulations set by the International Maritime Organization (IMO) to reduce air pollution from ships. VLSFO is primarily used for powering large vessels in the maritime sector. Ships in the marine industry are switching from High Sulfur Fuel Oil (HSFO) to VLSFO to comply with the sulfur emission standards set by the IMO 2020 regulation.

The impact of the COVID-19 pandemic on the Very Low Sulfur Fuel Oil (VLSFO) market growth was moderate as it was after the introduction of IMO 2020 norms that this market gained traction among the major players and its end-users, such as maritime trade and logistics. However, the pandemic hampered fuel consumption in the marine industry due to supply chain disruptions. Lockdowns and transport restrictions reduced manufacturing activities, and logistical challenges declined the overall cargo volume and changed trade patterns. With the outbreak of the COVID-19 virus, global VLSFO prices reached USD 263 per mt on 28^th April 2020, and that in the U.S. fell to USD 149.50 per mt on the same day. Thus, the market for Very Low Sulfur Fuel Oil (VLSFO) was negatively impacted.

Very Low Sulfur Fuel Oil (VLSFO) Market Trends

Investment in Infrastructure, Technological Advancements, and Supply Chain Optimization are Latest Trends in VLSFO Market

Investments in infrastructure, such as storage facilities, blending capabilities, and distribution networks have increased the availability and accessibility of Very Low Sulfur Fuel Oil in critical maritime regions. This infrastructure development supports the smooth transition to VLSFO and ensures reliable supply chain operations for ship operators. Moreover, advances in refining technology have enabled the production of VLSFO while maintaining fuel quality and performance standards. These technological advancements have made VLSFO a viable and accessible option for ship operators seeking compliance with the IMO regulations. Ongoing R&D efforts continue to drive innovation in VLSFO production processes, fuel treatment technologies, emissions reduction solutions, and alternative fuel development, with the aim of further improving fuel quality, environmental performance, and operational efficiency.

For instance, in October 2023, Chevron Marine Products completed the development and testing process of its newest Taro Ultra Advanced 40 oil, and also passed the NOL (No Objection Letter) requirements by engine manufacturer WinGD. This latest test validates the suitability of the oil for use in WinGD’s engines operating with liquid fuels containing sulfur in the range of 0.00 to 1.50% m/m, which includes VLSFO. The test also approved the general usage of Taro Ultra Advanced 40 when burning Liquefied Natural Gas (LNG) in WinGD engines.

Very Low Sulfur Fuel Oil (VLSFO) Market Growth Factors

Regulatory Compliance Due to Environmental Concerns to Augment Demand for VLSFO

The creation and utilization of VLSFO were primarily driven by the International Maritime Organization’s (IMO) regulations introduced in 2020. Implementation of this regulation mandated a hefty reduction in the sulfur content in the ship fuels from 3.5% to 0.5% starting January 1, 2020. It is aimed at decreasing the amount of sulfur oxide emissions from ships, which are one of the significant contributors to air pollution.

The ISO 8217 outlined the parameters for marine fuel, such as sulfur content, density, viscosity, and other critical properties that this fuel is required to meet to be considered compliant. Fuel suppliers and manufacturers are now designing and refining VLSFO to meet these requirements, ensuring that it is safe for use in marine engines and compatible with a wide range of ship types.

Before the IMO 2020 regulation, most ships used High Sulfur Fuel Oil (HSFO) due to its lower cost. With the new regulation in effect, the marine industry is switching to VLSFO, Marine Gas Oil (MGO), or installing scrubbers to continue using HSFO while complying with the sulfur emission standards. VLSFO has become the preferred choice for many due to its lower cost compared to MGO and less complex implementation compared to fitting scrubbers. The introduction of VLSFO as a fuel option for shipping companies was directly in response to the need for fuels that comply with both environmental regulations and quality standards set by the ISO. These factors are driving the demand for and utilization of VLSFO in the marine industry.

Government Support for Blue Economy and Increased Investment in Marine Industry

The blue economy is receiving significant attention in international and regional discourse and governments across the world are focusing on increasing their investment in the marine industry. For instance, in 2020, the marine economy accounted for USD 361 billion of the U.S. Gross Domestic Product (GDP) and USD 610 billion of the gross output. Movement of goods by sea is one of the most efficient forms of commercial transport, recording substantially lower carbon emissions per metric ton of cargo compared to that of other means of transport. Along with increased investment, regulatory frameworks and initiatives are promoting the use of cleaner fuels and stimulating the demand for VLSFO.

In early 2023, the U.S. released a “Blueprint Plan” for the decarbonization of its transportation sector, which also includes maritime shipping. This plan is built on the goals of decarbonization set by the IMO for new energy-efficient technologies and promoting research and innovation on alternative fuels, such as VLSFOs. Moreover, this blueprint’s objectives will be to ensure that 5% of the global deep-sea fleet runs on zero-emission fuels by 2030. These factors are expected to promote the adoption of newer fuels, such as VLSFO in the marine industry.

RESTRAINING FACTORS

Fuel Compatibility and Stability of VLSFO and Price Volatility is Hampering Market Growth

VLSFO has compatibility and stability issues with some of the existing engine types and fuel systems, which can lead to operational challenges, including engine malfunctions, increased maintenance requirements, and potential safety risks. This can discourage shipowners from adopting VLSFO. VLSFOs are more paraffinic compared to conventional fuels, such as High Sulfur Fuel Oils (HSFOs), which need specified temperatures to be stored. Improper storage can cause wax formation, which may lead to the clogging of fuel systems including filters. VPS global statistics on Very Low Sulfur Fuel Oil indicate that Wax Appearance Temperature (WAT) is about 20°C above the Pour Point. Maintaining settling tank temperatures below the WAT can lead to wax precipitation in the tanks which could then block the suction line and reduce the heating efficiency if the wax covers the heating coils. Therefore, knowing the exact WAT is essential to ensure proper fuel management.

Moreover, VLSFOs are higher in price compared to traditional high-sulfur fuel oils, which pose challenges for some shipowners and operators, especially in a competitive market environment where cost-saving measures are prioritized. According to the latest report by Marine Bunker Exchange, in December 2023, the global index 380 HSFO demonstrated a notable increase of USD  36.14, rising from USD 484.96/MT at the beginning of the year to USD 521.10/MT. In contrast, the VLSFO index fell by USD 28.19 to USD 678.39/MT. The most substantial loss, however, was observed in the MGO index, which decreased by USD 132.66 to USD 899.17/MT. These factors are expected to hamper the global VLSFO market growth.

Very Low Sulfur Fuel Oil (VLSFO) Market Segmentation Analysis

By Application Analysis

Containers Held Dominant Share Due to their Compatibility and Cost-effectiveness in Transporting Large Volume of Goods

Based on application, the global is divided into container, bulk carrier, oil tanker, general cargo, and others.

The containers segment held the dominant Very Low Sulfur Fuel Oil (VLSFO) market share as the maximum amount of non-bulk cargo is transported by container ships globally. Container transport is one of the most important and popular ways to move different types and sizes of goods around the globe. It has many advantages, such as reduced chance of freight damage and safety. It also improves productivity by reducing the delivery time, which meets the customer’s expectations.

The bulk carriers segment accounts for the second-highest share of the market. These carriers typically operate on tight profit margins and find VLSFO economically advantageous compared to Marine Gas Oil (MGO) or Marine Diesel Oil (MDO). Moreover, VLSFO is compatible with the engines commonly used in bulk carriers, which makes it a practical option without needing significant modifications to vessels' engines or fuel systems.

Oil tankers, which are similar to bulk carriers, are subject to IMO regulations regarding sulfur emissions. VLSFO helps these tankers comply with the regulations as it contains sulfur content of less than 0.5%. It also provides satisfactory performance in terms of fuel efficiency and engine operation, which is crucial for oil tankers that operate over long distances and carry valuable cargo.

REGIONAL INSIGHTS

The Very Low Sulfur Fuel Oil market has been studied geographically across five major regions: North America, Europe, Asia Pacific, Latin America, and the Middle East & Africa.

North America, particularly the U.S., has witnessed an increase in the demand for and production of VLSFO due to the implementation of IMO regulations and environmental policies. Numerous ports in the U.S. along the Gulf Coast and the West Coast, and refineries in Canada are contributing to the increase in VLSFO supply for domestic and international shipping.

Europe is one of the leading regions in the global Very Low Sulfur Fuel Oil market owing to the presence of significant players who are adopting and producing this fuel oil to adhere to stringent environmental regulations by the European Union. Moreover, some of the major refining centers, such as Rotterdam in the Netherlands and refineries in Mediterranean countries supply VLSFO to meet the demands of both domestic and international shipping.

Asia Pacific is one of the fastest-growing regions in the global VLSFO market in terms of both production and consumption of this fuel oil. Singapore, China, Japan, and South Korea are the major countries in the regional market. For instance, Singapore is one of the world's largest bunkering hubs, which plays a central role in supplying VLSFO to ships passing through the area.

Latin America has a presence in the VLSFO market, with countries, such as Brazil, Mexico, and Venezuela having refineries capable of producing VLSFO.

The Middle East & Africa are leveraging their refinery capacities to meet both regional and global demand.

KEY INDUSTRY PLAYERS

Expansion Plans of Leading Companies are Influencing Competitive Landscape of the Market

The global Very Low Sulfur Fuel Oil (VLSFO) market is highly competitive, driven by strict environmental regulations. Major players include oil giants like Shell, BP, ExxonMobil, and others, alongside regional suppliers such as Petro China, and Hindustan Petroleum Corporation. Competition in this market revolves around pricing, fuel quality, availability, and strategic port locations to ensure seamless supply to sipping companies. Additionally companies are focusing on expanding blending facilities and leveraging advanced refining technologies to meet demand while adhering to emissions standards.

List of Top Very Low Sulfur Fuel Oil (VLSFO) Companies:

• Exxon Mobil (U.S.)


• BP (U.K.)


• Shell (U.K.)


• China Marine Bunker (Petro China) Co., Ltd. (China)


• World Kinect Corporation (U.S.)


• Bunker Holding Group (Denmark)


• TotalEnergies Marine Fuels (France)


• Future Fuels (India)


• SINOPEC (China)


• Hindustan Petroleum Corporation Ltd. (India)

KEY INDUSTRY DEVELOPMENTS:

• August 2022: ExxonMobil delivered two commercial bio-based marine fuel oil bunkering systems in the port of LDC in Singapore. The marine biofuel used is a 0.50% sulfur residual-based fuel (VLSFO), which is processed with up to 25% waste-based Fatty Acid Methyl Esters (FAME).


• February 2022: Rio Tinto and BP signed an agreement to work together on a one-year biofuel trial to help Rio Tinto reduce carbon emissions from its marine fleet. BP signed the deal to supply Rio Tinto with marine biofuel, which is a B30 biofuel blend composed of 30% fatty acid methyl esters blended with Very Low Sulfur Fuel Oil (VLSFO). It is to be trialed on Rio Tinto’s RTM Tasman vessel on a mix of Atlantic-Pacific and Transatlantic routes.


• December 2021: BP and Maersk Tankers completed trials of biofuel-blended marine fuel in product tankers with the help of the Danish Maritime Authority. For the trials, each vessel used BP’s Marine B30 biofuel, which consisted of 30% Fatty Acid Methyl Esters (FAME) blended with Very Low Sulfur Fuel Oil (VLSFO). The trials were carried out on Maersk Cirrus and Maersk Navigator from Maersk Tankers.


• February 2021: Maersk, an integrated container logistics company in Denmark, announced that it would launch the world’s first carbon-neutral liner vessel in 2023. With this new announcement, all future Maersk buildings will have dual fuel technology to enable carbon-neutral operations with standard Very Low Sulfur Fuel Oil (VLSFO).


• September 2020: ExxonMobil completed the sea trial of its first marine biofuel oil with a shipping company named Stena Bulk in the port of Rotterdam. The marine biofuel oil is a 0.50% sulfur residual-based fuel (VLSFO) processed with a second-generation waste-based FAME component.

REPORT COVERAGE

The report provides a detailed analysis of the market and focuses on key aspects, such as major players, product types, and leading applications of the product. Besides, it offers insights into the market trends and highlights key industry developments. In addition to the factors listed above, the report encompasses several factors that have contributed to the growth of the market in recent years.

Report Scope & Segmentation