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Saturday, 11 December 21
BUNKER BUYERS LOSE UP TO $5/MT FOR NOT COVERING ENOUGH SUPPLIERS - INTEGR8 FUELS
With the Brent price recently touching the $80 mark and before the Omicron variant concerns pushed it lower, bunker prices reached levels not seen since early 2020. Following the OPEC+ decision not to release additional crude oil volumes on the market and continuing to add to existing supply gradually, we may see more oil price increases going forward, particularly if Omicron proves to be less deadly as initially thought and given the current tight oil supply and demand balance.
The process of buying bunker fuel is essentially a reverse auction where more participants often mean a better price achieved, which is particularly important in the high oil price environment. In this article, we discuss the reasons and quantify the impact of low supplier coverage and response rate on the price paid and look into the ways to get more suppliers to quote.
More suppliers quoting means lower price paid…
We analysed a sample of over 250 Integr8 Fuels stems fixed so far in 2021 covering the hubs of ARA, Gibralter Straits and Malta which are served by multiple suppliers. For each stem, only the larger quantity fuel was analysed (often VLSFO or HSFO, unless a single LSMGO grade was procured) as supplier coverage in the dual fuel stems often depends on the main larger quantity grade.
Figure 1. shows the relationship between the supplier response rate (the share of suppliers quoting a price in the total number of suppliers) and the average premium or discount paid over the bunker benchmark price provided by ENGINE.
It is evident that, on average, stems with less than 20% of suppliers quoting were fixed at a slight premium to the benchmark, while stems with over 60% of suppliers quoting were fixed at significant discounts, hence having more suppliers’ quotes resulted in an average savings of up to $5/mt. And there are a number of ways to achieve such savings.
To visually represent this, all the stems have been mapped for supplier coverage and response rate with stems falling into three distinct categories (Figure 2.). Around 30% of stems fall into the first category, where both supplier coverage and response rates were low, including most of the stems with one supplier. Stems in this category were on average fixed with a $0.2/mt discount to the ENGINE benchmark price.
Intuitively, an over payment could be expected, however, the small discount was mostly due to a number of large quantity fixtures that usually attract good prices. The stems in the second category, which constitute around 15% of all stems, had good a supplier coverage but a low response rate.These are characterised by their smaller size, shorter lead time and a small discount to the benchmark of $0.3/mt. A lot of these fixtures were done for same day delivery. Lastly, in the third category are the stems with a good supplier coverage and response rate -these on average achieved a much larger discount of $3.4/mt to the benchmark and this is the category where more fixtures should be aiming to be.
Interestingly, we found a number of stems with the high supplier coverage and response rate yet with sizeable over-payments beyond the ENGINE benchmark pricing. The main reason for this was found to be the limitation imposed by some companies in the wake of the IMO2020 change on the acceptable levels of sulphur and viscosity when buying VLSFO. While in some instances such limitations helped to avoid buying fuel that was more likely to test off-spec or cause issues on board vessels, in others this meant that some suppliers offering lower prices were being disqualified on the basis of provisional certificates of quality which were not always representative of the delivered fuel quality. A similar trend was spotted among the minority of stems where a certain spec was requested, for example ISO8217:2017.
Overall, the data shows that increasing the lead time and stem quantity, avoiding out of hours and weekend enquiries, being flexible with the fuel specs where operationally possible and safe to do so, can help increase suppliers’ response and achieve a better price paid. Moving beyond the stem sample analysed, another typical reason for sub-optimal supplier coverage is that some companies only prefer to deal with a limited number of physical suppliers directly.
Traders can help increase supplier coverage
Direct business is often perceived as the only way to achieve low prices as it cuts the middleman from the equation. This does work well for large companies buying substantial volumes of bunkers globally who have the resources to negotiate prices, set up and maintain credit lines with the hundreds of suppliers globally. However, the reality is that a lot of medium and smaller companies may only be dealing with a handful of suppliers directly thus not covering the whole market. This significantly limits their bargaining power. A trader can not only cover the rest of the market but also act as insurance policy should the company’s own credit lines with suppliers become tight, particularly in the rising oil price environment.
Long gone the days when traders were matching sellers with buyers. In recent years, investment has been going into gathering data, setting up systems, news flow and analytics. While receiving quotes and sending back counteroffers to five suppliers may not sound too complex, a trader may have a system that allows to compare supplier quotations on the weighted by fuel grade average price while also considering suppliers’ historical claims, density short lifts, recent quality issues and fuel energy content. These days a trader can not only cover every supplier in the market but also warn about supply delays (as no one wants their $40,000/day earning bulk carrier to go off hire waiting for bunker supplies), worsening weather conditions, help prevent claims, bundle up several enquiries to achieve volume discounts and even help with bunker planning and suggest the most optimal port or combination of ports to bunker your vessel.
Source: Integr8 Fuels
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Friday, 05 January 24
BANGLADESH’S 2023 COAL-FIRED POWER OUTPUT TRIPLED, EASING SHORTAGES - REUTERS
Bangladesh nearly tripled its coal-fired power output in 2023, a Reuters analysis of government data showed, helping it tide over the worst power s ...
Tuesday, 02 January 24
COAL TRADE CONTINUES TO HEAD EAST - BALTIC EXCHANGE
The global coal trade, once concentrated in the Pacific and Atlantic basins, is undergoing a significant transformation, as highlighted in the Inte ...
Tuesday, 02 January 24
COAL CARGOES: AVOIDING EXPLOSION AND SELF-HEATING - GARD
KNOWLEDGE TO ELEVATE
Despite its contribution to greenhouse gas emissions, global coal consumption climbed to an all-time high in 2022 and is ...
Tuesday, 02 January 24
SINOPEC FORECASTS CHINA’S COAL CONSUMPTION TO PEAK AROUND 2025 - REUTERS
China Petrochemical Corp, or Sinopec, expects coal consumption to peak around 2025 at 4.37 billion metric tons, the state energy group said in an o ...
Thursday, 07 December 23
CHINA TO SET UP COAL PRODUCTION RESERVE TO STABILISE PRICES - REUTERS
China will establish a back-up coal production system by 2027 to stabilise prices and secure coal supply, the state planner said on Wednesday, even ...
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- IEA Clean Coal Centre - UK
- GAC Shipping (India) Pvt Ltd
- Barasentosa Lestari - Indonesia
- Kideco Jaya Agung - Indonesia
- Meenaskhi Energy Private Limited - India
- Global Coal Blending Company Limited - Australia
- Krishnapatnam Port Company Ltd. - India
- Sindya Power Generating Company Private Ltd
- Directorate Of Revenue Intelligence - India
- Videocon Industries ltd - India
- Mercator Lines Limited - India
- Asmin Koalindo Tuhup - Indonesia
- Meralco Power Generation, Philippines
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Bank of Tokyo Mitsubishi UFJ Ltd
- London Commodity Brokers - England
- Bharathi Cement Corporation - India
- Oldendorff Carriers - Singapore
- Siam City Cement PLC, Thailand
- Kartika Selabumi Mining - Indonesia
- Riau Bara Harum - Indonesia
- Bhatia International Limited - India
- Mjunction Services Limited - India
- Coal and Oil Company - UAE
- Central Electricity Authority - India
- Manunggal Multi Energi - Indonesia
- AsiaOL BioFuels Corp., Philippines
- SN Aboitiz Power Inc, Philippines
- Trasteel International SA, Italy
- Energy Link Ltd, New Zealand
- Indo Tambangraya Megah - Indonesia
- Agrawal Coal Company - India
- San Jose City I Power Corp, Philippines
- Orica Australia Pty. Ltd.
- Rio Tinto Coal - Australia
- Australian Coal Association
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Vedanta Resources Plc - India
- Pipit Mutiara Jaya. PT, Indonesia
- Maharashtra Electricity Regulatory Commission - India
- Bukit Baiduri Energy - Indonesia
- Cigading International Bulk Terminal - Indonesia
- International Coal Ventures Pvt Ltd - India
- Essar Steel Hazira Ltd - India
- Independent Power Producers Association of India
- Grasim Industreis Ltd - India
- ASAPP Information Group - India
- Binh Thuan Hamico - Vietnam
- Minerals Council of Australia
- TeaM Sual Corporation - Philippines
- Chettinad Cement Corporation Ltd - India
- OPG Power Generation Pvt Ltd - India
- Interocean Group of Companies - India
- Latin American Coal - Colombia
- Jindal Steel & Power Ltd - India
- Sinarmas Energy and Mining - Indonesia
- The University of Queensland
- Wilmar Investment Holdings
- TNB Fuel Sdn Bhd - Malaysia
- Miang Besar Coal Terminal - Indonesia
- Dalmia Cement Bharat India
- Sakthi Sugars Limited - India
- Georgia Ports Authority, United States
- Borneo Indobara - Indonesia
- South Luzon Thermal Energy Corporation
- Leighton Contractors Pty Ltd - Australia
- SMC Global Power, Philippines
- Bhoruka Overseas - Indonesia
- Economic Council, Georgia
- Directorate General of MIneral and Coal - Indonesia
- Uttam Galva Steels Limited - India
- Parliament of New Zealand
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Ind-Barath Power Infra Limited - India
- Global Green Power PLC Corporation, Philippines
- Eastern Coal Council - USA
- Alfred C Toepfer International GmbH - Germany
- Edison Trading Spa - Italy
- Merrill Lynch Commodities Europe
- Petron Corporation, Philippines
- PetroVietnam Power Coal Import and Supply Company
- Mintek Dendrill Indonesia
- Bangladesh Power Developement Board
- Aditya Birla Group - India
- Banpu Public Company Limited - Thailand
- Commonwealth Bank - Australia
- CIMB Investment Bank - Malaysia
- European Bulk Services B.V. - Netherlands
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- India Bulls Power Limited - India
- Antam Resourcindo - Indonesia
- Gujarat Electricity Regulatory Commission - India
- Therma Luzon, Inc, Philippines
- GMR Energy Limited - India
- Central Java Power - Indonesia
- Bukit Asam (Persero) Tbk - Indonesia
- Neyveli Lignite Corporation Ltd, - India
- Star Paper Mills Limited - India
- SMG Consultants - Indonesia
- Vijayanagar Sugar Pvt Ltd - India
- Rashtriya Ispat Nigam Limited - India
- Makarim & Taira - Indonesia
- PNOC Exploration Corporation - Philippines
- Romanian Commodities Exchange
- Iligan Light & Power Inc, Philippines
- Wood Mackenzie - Singapore
- Bhushan Steel Limited - India
- Electricity Generating Authority of Thailand
- Billiton Holdings Pty Ltd - Australia
- Maheswari Brothers Coal Limited - India
- Samtan Co., Ltd - South Korea
- Energy Development Corp, Philippines
- Heidelberg Cement - Germany
- Kohat Cement Company Ltd. - Pakistan
- Parry Sugars Refinery, India
- Karbindo Abesyapradhi - Indoneisa
- Gujarat Sidhee Cement - India
- VISA Power Limited - India
- Thai Mozambique Logistica
- Sree Jayajothi Cements Limited - India
- Globalindo Alam Lestari - Indonesia
- Baramulti Group, Indonesia
- Lanco Infratech Ltd - India
- Kalimantan Lumbung Energi - Indonesia
- Standard Chartered Bank - UAE
- McConnell Dowell - Australia
- LBH Netherlands Bv - Netherlands
- Indian Energy Exchange, India
- Anglo American - United Kingdom
- Timah Investasi Mineral - Indoneisa
- Vizag Seaport Private Limited - India
- Kumho Petrochemical, South Korea
- MS Steel International - UAE
- Semirara Mining Corp, Philippines
- Siam City Cement - Thailand
- Salva Resources Pvt Ltd - India
- Petrochimia International Co. Ltd.- Taiwan
- Cement Manufacturers Association - India
- Intertek Mineral Services - Indonesia
- Indogreen Group - Indonesia
- Straits Asia Resources Limited - Singapore
- Semirara Mining and Power Corporation, Philippines
- Africa Commodities Group - South Africa
- The Treasury - Australian Government
- PTC India Limited - India
- Carbofer General Trading SA - India
- Ministry of Finance - Indonesia
- Xindia Steels Limited - India
- Bahari Cakrawala Sebuku - Indonesia
- Indika Energy - Indonesia
- Australian Commodity Traders Exchange
- Savvy Resources Ltd - HongKong
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Coalindo Energy - Indonesia
- New Zealand Coal & Carbon
- ICICI Bank Limited - India
- Orica Mining Services - Indonesia
- Power Finance Corporation Ltd., India
- Altura Mining Limited, Indonesia
- Pendopo Energi Batubara - Indonesia
- Toyota Tsusho Corporation, Japan
- Madhucon Powers Ltd - India
- Coastal Gujarat Power Limited - India
- Medco Energi Mining Internasional
- Sojitz Corporation - Japan
- Ministry of Mines - Canada
- Aboitiz Power Corporation - Philippines
- Ambuja Cements Ltd - India
- Deloitte Consulting - India
- Tata Chemicals Ltd - India
- Renaissance Capital - South Africa
- Metalloyd Limited - United Kingdom
- Indonesian Coal Mining Association
- PowerSource Philippines DevCo
- Bayan Resources Tbk. - Indonesia
- GVK Power & Infra Limited - India
- Goldman Sachs - Singapore
- Sarangani Energy Corporation, Philippines
- IHS Mccloskey Coal Group - USA
- Jorong Barutama Greston.PT - Indonesia
- Tamil Nadu electricity Board
- Larsen & Toubro Limited - India
- Price Waterhouse Coopers - Russia
- Karaikal Port Pvt Ltd - India
- Port Waratah Coal Services - Australia
- Posco Energy - South Korea
- White Energy Company Limited
- Gujarat Mineral Development Corp Ltd - India
- Simpson Spence & Young - Indonesia
- Planning Commission, India
- Singapore Mercantile Exchange
- Thiess Contractors Indonesia
- CNBM International Corporation - China
- Bulk Trading Sa - Switzerland
- Ceylon Electricity Board - Sri Lanka
- Mercuria Energy - Indonesia
- Ministry of Transport, Egypt
- Eastern Energy - Thailand
- Bukit Makmur.PT - Indonesia
- Kapuas Tunggal Persada - Indonesia
- Malabar Cements Ltd - India
- Kaltim Prima Coal - Indonesia
- Kepco SPC Power Corporation, Philippines
- GN Power Mariveles Coal Plant, Philippines
- Formosa Plastics Group - Taiwan
- Holcim Trading Pte Ltd - Singapore
- The State Trading Corporation of India Ltd
- Electricity Authority, New Zealand
- Chamber of Mines of South Africa
- Jaiprakash Power Ventures ltd
- Sical Logistics Limited - India
- Kobexindo Tractors - Indoneisa
- Offshore Bulk Terminal Pte Ltd, Singapore
- Attock Cement Pakistan Limited
- Indian Oil Corporation Limited
- Marubeni Corporation - India
- Global Business Power Corporation, Philippines
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