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Kandy Wong

China’s exports of jet fuel have declined sharply in recent weeks amid the US-Israel war on Iran, leaving countries including Australia and Japan facing a supply crunch and scrambling to find alternative sellers.
China is Asia-Pacific’s largest jet fuel and kerosene exporter, but shipments from the country fell nearly 40 per cent month on month in March to 204,000 barrels per day, figures from trade data provider Kpler showed.
The cutback is likely to hit hardest in Australia and Japan, which are both heavily reliant on Chinese jet fuel, according to Kpler. Other countries affected include Vietnam, Malaysia, the Philippines, Singapore, South Korea, Canada and the United States.
Global jet fuel prices have roughly doubled since the start of the war, soaring from US$99.40 per barrel during the last week of February to US$195.19 per barrel last week, according to data from market intelligence firm Platts.
The spike is already being felt across the aviation industry. Passengers should expect 8 to 15 per cent higher fares plus larger fuel surcharges, as well as a decrease in flights as budget carriers cut routes, according to Osama Rizvi, a global market and product strategist at market intelligence firm Primary Vision.
Scott Charlton, chief executive of Sydney Airport, warned in early March that there were no guarantees that Australia’s airports would receive aviation fuel the following month, as the country remained overreliant on overseas supplies.
Australian Transport Minister Catherine King and Energy Minister Chris Bowen held talks with airlines including Qantas and Virgin Australia on March 12, seeking to reassure them that fuel supplies would hold up.
“Australia will be able to source jet fuel from elsewhere, but it will be at a cost,” said Michael Feller, co-founder and chief strategist at consulting firm Geopolitical Strategy in Melbourne.
“Australia’s limited refining capabilities have proven a strategic weakness and will be reflected in higher airfares and lower airline margins.”


With less than 30 days of reserves remaining, Australia is scrambling to source jet fuel from South Korea, Taiwan, Singapore, Malaysia and India, but they are dealing with their own supply constraints, according to Rizvi.
“Qantas is raising fares,” he said. “If new tankers don’t arrive in April, rationing is on the table, as we are already seeing in the Philippines.”
This week, the Australian government said that fuel imports were secured through to the beginning of May.
Australia’s jet fuel flows fell 46 per cent year on year to 21,000 barrels per day in March, Kpler’s figures showed. Japan was “virtually” zeroed out, with flows collapsing by 99 per cent year on year.
“The Philippines, Singapore, Canada and the United States all received nothing,” said Zameer Yusof, senior lead research analyst of middle distillates at Kpler. “Vietnam and South Korea roughly halved.”
The impact on airlines would depend heavily on their hedging strategies, Yusof said, but airlines were not fully protected because most hedging programmes were linked to crude oil – typically Brent – rather than jet fuel itself.
“In normal times the two move roughly together so the gap is manageable,” he added. “Right now, the gap is blowing out because the shortage is specific to jet fuel, not just crude.”
An airline can be 80 per cent hedged and still face a massive cost increase, as its hedge does not cover the part of the price that is surging the most, according to Yusof.
“We expect more fuel surcharges and capacity rationalisation from April, led by Asia and the US, broadening globally by May as European hedge cover expires,” he said, adding that fuel accounts for roughly one-quarter of airlines’ operating costs.


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Both Australia and Japan are heavily reliant on Chinese jet fuel, but shipments have plunged in recent weeks amid the Iran war


Both Australia and Japan are heavily reliant on Chinese jet fuel, but shipments have plunged in recent weeks amid the Iran war.


Australia and Japan face jet fuel supply crunch as China cuts exports

.css-1c6uqr6{color:inherit;font-weight:inherit;font-size:inherit;font-family:inherit;line-height:inherit;overflow-wrap:break-word;}Both Australia and Japan are heavily reliant on Chinese jet fuel, but shipments have plunged in recent weeks amid the Iran war

Both Australia and Japan are heavily reliant on Chinese jet fuel, but shipments have plunged in recent weeks amid the Iran war