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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, 01 December 23
COAL MINERS GROUP EXPECTS INDONESIA’S 2023 COAL OUTPUT TO SURPASS TARGET - REUTERS
The Indonesian Coal Mining Association (ICMA) expects the country’s 2023 coal output to surpass the official target of 695 million metric ton ...
Friday, 24 November 23
COAL IMPORTS TO INDIA IN OCTOBER 2023 REACHED HIGHEST LEVELS IN NEARLY A YEAR AND A HALF - VESSELSVALUE, VESON NAUTICAL
In October, coal imports to India reached 13.8 mt in October 2023, according to Oceanbolt, a Veson Nautical solution, the highest level since May 2 ...
Friday, 24 November 23
COAL SHIPMENTS TO ADVANCED ECONOMIES DOWN 17% SO FAR IN 2023 - BIMCO
In the first ten months of 2023, coal shipments to advanced economies fell by 17% y/y, as demand for electricity declined and the share of electric ...
Friday, 24 November 23
INTELLIGENT COAL MINES CONTRIBUTE TO IMPROVING SAFETY STANDARDS - CHINA DAILY
Mechanization, automation and intelligent upgrades have contributed to improved safety in coal mines, though the level of development of intelligen ...
Friday, 24 November 23
WHY AUSTRALIA'S COAL MINES ARE GETTING BIGGER - IEEFA
Australia’s largest coal mines are getting larger. Mines in New South Wales (NSW) are ramping up production following the state’s recov ...
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- Savvy Resources Ltd - HongKong
- SMC Global Power, Philippines
- Energy Development Corp, Philippines
- Holcim Trading Pte Ltd - Singapore
- Renaissance Capital - South Africa
- London Commodity Brokers - England
- Minerals Council of Australia
- Riau Bara Harum - Indonesia
- ICICI Bank Limited - India
- IEA Clean Coal Centre - UK
- Attock Cement Pakistan Limited
- Anglo American - United Kingdom
- Cement Manufacturers Association - India
- Heidelberg Cement - Germany
- Kideco Jaya Agung - Indonesia
- Manunggal Multi Energi - Indonesia
- Sindya Power Generating Company Private Ltd
- Standard Chartered Bank - UAE
- Georgia Ports Authority, United States
- Kalimantan Lumbung Energi - Indonesia
- Price Waterhouse Coopers - Russia
- McConnell Dowell - Australia
- Tamil Nadu electricity Board
- Xindia Steels Limited - India
- Kepco SPC Power Corporation, Philippines
- Straits Asia Resources Limited - Singapore
- Agrawal Coal Company - India
- GVK Power & Infra Limited - India
- Metalloyd Limited - United Kingdom
- Toyota Tsusho Corporation, Japan
- Africa Commodities Group - South Africa
- Rio Tinto Coal - Australia
- Indika Energy - Indonesia
- Asmin Koalindo Tuhup - Indonesia
- Sical Logistics Limited - India
- Meralco Power Generation, Philippines
- Intertek Mineral Services - Indonesia
- LBH Netherlands Bv - Netherlands
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Ambuja Cements Ltd - India
- Indogreen Group - Indonesia
- Electricity Generating Authority of Thailand
- Altura Mining Limited, Indonesia
- Vijayanagar Sugar Pvt Ltd - India
- Iligan Light & Power Inc, Philippines
- Independent Power Producers Association of India
- Billiton Holdings Pty Ltd - Australia
- Electricity Authority, New Zealand
- Central Java Power - Indonesia
- Siam City Cement - Thailand
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- PowerSource Philippines DevCo
- Neyveli Lignite Corporation Ltd, - India
- SN Aboitiz Power Inc, Philippines
- The State Trading Corporation of India Ltd
- Kartika Selabumi Mining - Indonesia
- Kapuas Tunggal Persada - Indonesia
- Singapore Mercantile Exchange
- Globalindo Alam Lestari - Indonesia
- Karaikal Port Pvt Ltd - India
- Borneo Indobara - Indonesia
- Banpu Public Company Limited - Thailand
- Therma Luzon, Inc, Philippines
- Sarangani Energy Corporation, Philippines
- Latin American Coal - Colombia
- CIMB Investment Bank - Malaysia
- GAC Shipping (India) Pvt Ltd
- Orica Mining Services - Indonesia
- Petron Corporation, Philippines
- Carbofer General Trading SA - India
- Coastal Gujarat Power Limited - India
- MS Steel International - UAE
- Bukit Asam (Persero) Tbk - Indonesia
- TNB Fuel Sdn Bhd - Malaysia
- Interocean Group of Companies - India
- Wilmar Investment Holdings
- India Bulls Power Limited - India
- VISA Power Limited - India
- Dalmia Cement Bharat India
- Formosa Plastics Group - Taiwan
- Bhushan Steel Limited - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Bank of Tokyo Mitsubishi UFJ Ltd
- Indian Oil Corporation Limited
- Thai Mozambique Logistica
- PetroVietnam Power Coal Import and Supply Company
- Pipit Mutiara Jaya. PT, Indonesia
- New Zealand Coal & Carbon
- International Coal Ventures Pvt Ltd - India
- Bayan Resources Tbk. - Indonesia
- Bharathi Cement Corporation - India
- Gujarat Electricity Regulatory Commission - India
- Marubeni Corporation - India
- Timah Investasi Mineral - Indoneisa
- Edison Trading Spa - Italy
- Mintek Dendrill Indonesia
- Vizag Seaport Private Limited - India
- Power Finance Corporation Ltd., India
- Ministry of Mines - Canada
- Commonwealth Bank - Australia
- SMG Consultants - Indonesia
- Ministry of Transport, Egypt
- Chettinad Cement Corporation Ltd - India
- Antam Resourcindo - Indonesia
- Sojitz Corporation - Japan
- Vedanta Resources Plc - India
- Medco Energi Mining Internasional
- Kobexindo Tractors - Indoneisa
- Directorate General of MIneral and Coal - Indonesia
- Aditya Birla Group - India
- Central Electricity Authority - India
- Sakthi Sugars Limited - India
- Bhoruka Overseas - Indonesia
- PNOC Exploration Corporation - Philippines
- Port Waratah Coal Services - Australia
- Bangladesh Power Developement Board
- Essar Steel Hazira Ltd - India
- Alfred C Toepfer International GmbH - Germany
- CNBM International Corporation - China
- Offshore Bulk Terminal Pte Ltd, Singapore
- Lanco Infratech Ltd - India
- Sree Jayajothi Cements Limited - India
- IHS Mccloskey Coal Group - USA
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- The University of Queensland
- Jaiprakash Power Ventures ltd
- Miang Besar Coal Terminal - Indonesia
- Indian Energy Exchange, India
- Global Business Power Corporation, Philippines
- AsiaOL BioFuels Corp., Philippines
- Parry Sugars Refinery, India
- TeaM Sual Corporation - Philippines
- Jindal Steel & Power Ltd - India
- Baramulti Group, Indonesia
- Bukit Makmur.PT - Indonesia
- Krishnapatnam Port Company Ltd. - India
- Chamber of Mines of South Africa
- Gujarat Mineral Development Corp Ltd - India
- Petrochimia International Co. Ltd.- Taiwan
- Energy Link Ltd, New Zealand
- Semirara Mining Corp, Philippines
- Karbindo Abesyapradhi - Indoneisa
- GN Power Mariveles Coal Plant, Philippines
- Global Green Power PLC Corporation, Philippines
- Coalindo Energy - Indonesia
- Orica Australia Pty. Ltd.
- Directorate Of Revenue Intelligence - India
- Thiess Contractors Indonesia
- Barasentosa Lestari - Indonesia
- Coal and Oil Company - UAE
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Deloitte Consulting - India
- Trasteel International SA, Italy
- Merrill Lynch Commodities Europe
- Goldman Sachs - Singapore
- The Treasury - Australian Government
- Mercator Lines Limited - India
- OPG Power Generation Pvt Ltd - India
- Eastern Coal Council - USA
- Kaltim Prima Coal - Indonesia
- Jorong Barutama Greston.PT - Indonesia
- Tata Chemicals Ltd - India
- Leighton Contractors Pty Ltd - Australia
- Grasim Industreis Ltd - India
- Maheswari Brothers Coal Limited - India
- Posco Energy - South Korea
- Australian Coal Association
- Pendopo Energi Batubara - Indonesia
- Global Coal Blending Company Limited - Australia
- Wood Mackenzie - Singapore
- Bhatia International Limited - India
- Mjunction Services Limited - India
- Larsen & Toubro Limited - India
- Planning Commission, India
- Videocon Industries ltd - India
- Kumho Petrochemical, South Korea
- ASAPP Information Group - India
- South Luzon Thermal Energy Corporation
- Bukit Baiduri Energy - Indonesia
- Kohat Cement Company Ltd. - Pakistan
- Maharashtra Electricity Regulatory Commission - India
- Aboitiz Power Corporation - Philippines
- Ind-Barath Power Infra Limited - India
- Meenaskhi Energy Private Limited - India
- Australian Commodity Traders Exchange
- Indo Tambangraya Megah - Indonesia
- Sinarmas Energy and Mining - Indonesia
- Makarim & Taira - Indonesia
- Indonesian Coal Mining Association
- Romanian Commodities Exchange
- Siam City Cement PLC, Thailand
- Economic Council, Georgia
- Star Paper Mills Limited - India
- Samtan Co., Ltd - South Korea
- Gujarat Sidhee Cement - India
- Rashtriya Ispat Nigam Limited - India
- Parliament of New Zealand
- Ceylon Electricity Board - Sri Lanka
- Eastern Energy - Thailand
- San Jose City I Power Corp, Philippines
- Malabar Cements Ltd - India
- Madhucon Powers Ltd - India
- White Energy Company Limited
- PTC India Limited - India
- Bulk Trading Sa - Switzerland
- Uttam Galva Steels Limited - India
- Semirara Mining and Power Corporation, Philippines
- Bahari Cakrawala Sebuku - Indonesia
- Salva Resources Pvt Ltd - India
- Ministry of Finance - Indonesia
- Mercuria Energy - Indonesia
- GMR Energy Limited - India
- Cigading International Bulk Terminal - Indonesia
- Oldendorff Carriers - Singapore
- Binh Thuan Hamico - Vietnam
- European Bulk Services B.V. - Netherlands
- Simpson Spence & Young - Indonesia
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