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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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Thursday, 09 November 23
GREEK AND CHINESE COMPANIES OWN 34% OF THE GLOBAL FLEET’S CARGO CAPACITY - BIMCO
“The global fleet of cargo carrying ships consists of around 61,000 ships with a deadweight capacity of about 2,200 million tonnes. The ships ...
Monday, 23 October 23
CHINA SEPT COAL OUTPUT HITS SIX-MONTH HIGH ON RISING POWER DEMAND - REUTERS
China’s September coal output rose 0.4% from August to the highest level since March, official data showed on Wednesday, on rising power dema ...
Monday, 23 October 23
INDIA COAL INVENTORIES DROP AT FASTEST PACE IN TWO YEARS, BOOSTING IMPORTS - REUTERS
Coal inventories at Indian power plants in the first half of October fell at their fastest rate in two years, an analysis of government data showed ...
Tuesday, 19 September 23
LNG SHIPPING STOCKS: THE ASIAN GROWTH UP-INDICES
Last week, the UP World LNG Shipping Index (UPI) gained 3.81 points or 2.51%, closing at 155.85 points. This index tracks the performance of LNG sh ...
Sunday, 10 September 23
GOLDMAN SACHS PREDICTS OIL PRICE TO HIT $100 ON OPEC CUTS - YAHOO FINANCE
Oil supply cuts by Saudi Arabia and Russia could lead to Brent crude jumping as high as $107 a barrel in 2024, Goldman Sachs Commodities Research h ...
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- Global Business Power Corporation, Philippines
- Port Waratah Coal Services - Australia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Pipit Mutiara Jaya. PT, Indonesia
- Indian Oil Corporation Limited
- Billiton Holdings Pty Ltd - Australia
- Trasteel International SA, Italy
- Interocean Group of Companies - India
- PetroVietnam Power Coal Import and Supply Company
- South Luzon Thermal Energy Corporation
- PTC India Limited - India
- MS Steel International - UAE
- McConnell Dowell - Australia
- Samtan Co., Ltd - South Korea
- Neyveli Lignite Corporation Ltd, - India
- Siam City Cement - Thailand
- Bank of Tokyo Mitsubishi UFJ Ltd
- VISA Power Limited - India
- TNB Fuel Sdn Bhd - Malaysia
- Barasentosa Lestari - Indonesia
- Ind-Barath Power Infra Limited - India
- Ceylon Electricity Board - Sri Lanka
- Romanian Commodities Exchange
- Toyota Tsusho Corporation, Japan
- Xindia Steels Limited - India
- Lanco Infratech Ltd - India
- Vedanta Resources Plc - India
- Maharashtra Electricity Regulatory Commission - India
- Sojitz Corporation - Japan
- Ministry of Transport, Egypt
- Simpson Spence & Young - Indonesia
- Ministry of Finance - Indonesia
- Oldendorff Carriers - Singapore
- GN Power Mariveles Coal Plant, Philippines
- Binh Thuan Hamico - Vietnam
- PowerSource Philippines DevCo
- Goldman Sachs - Singapore
- Australian Coal Association
- Indo Tambangraya Megah - Indonesia
- OPG Power Generation Pvt Ltd - India
- Ministry of Mines - Canada
- Sinarmas Energy and Mining - Indonesia
- Eastern Energy - Thailand
- Price Waterhouse Coopers - Russia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Mjunction Services Limited - India
- Metalloyd Limited - United Kingdom
- Heidelberg Cement - Germany
- Economic Council, Georgia
- Karbindo Abesyapradhi - Indoneisa
- Dalmia Cement Bharat India
- Bhushan Steel Limited - India
- Anglo American - United Kingdom
- Manunggal Multi Energi - Indonesia
- Medco Energi Mining Internasional
- Attock Cement Pakistan Limited
- GVK Power & Infra Limited - India
- Sical Logistics Limited - India
- Merrill Lynch Commodities Europe
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Cigading International Bulk Terminal - Indonesia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Georgia Ports Authority, United States
- Sree Jayajothi Cements Limited - India
- Deloitte Consulting - India
- Chettinad Cement Corporation Ltd - India
- Directorate Of Revenue Intelligence - India
- Global Coal Blending Company Limited - Australia
- Australian Commodity Traders Exchange
- Energy Link Ltd, New Zealand
- Edison Trading Spa - Italy
- Directorate General of MIneral and Coal - Indonesia
- Banpu Public Company Limited - Thailand
- Pendopo Energi Batubara - Indonesia
- Mercuria Energy - Indonesia
- India Bulls Power Limited - India
- Semirara Mining Corp, Philippines
- Aditya Birla Group - India
- Bukit Asam (Persero) Tbk - Indonesia
- Vijayanagar Sugar Pvt Ltd - India
- Miang Besar Coal Terminal - Indonesia
- Tata Chemicals Ltd - India
- Formosa Plastics Group - Taiwan
- Electricity Generating Authority of Thailand
- Mintek Dendrill Indonesia
- ASAPP Information Group - India
- Thai Mozambique Logistica
- Grasim Industreis Ltd - India
- Renaissance Capital - South Africa
- Essar Steel Hazira Ltd - India
- Orica Australia Pty. Ltd.
- Indian Energy Exchange, India
- Straits Asia Resources Limited - Singapore
- San Jose City I Power Corp, Philippines
- Thiess Contractors Indonesia
- Savvy Resources Ltd - HongKong
- Bhatia International Limited - India
- Kideco Jaya Agung - Indonesia
- Kartika Selabumi Mining - Indonesia
- Star Paper Mills Limited - India
- LBH Netherlands Bv - Netherlands
- Holcim Trading Pte Ltd - Singapore
- Central Electricity Authority - India
- IEA Clean Coal Centre - UK
- Indonesian Coal Mining Association
- Borneo Indobara - Indonesia
- Coalindo Energy - Indonesia
- The Treasury - Australian Government
- Malabar Cements Ltd - India
- TeaM Sual Corporation - Philippines
- ICICI Bank Limited - India
- Bayan Resources Tbk. - Indonesia
- Cement Manufacturers Association - India
- Wilmar Investment Holdings
- Wood Mackenzie - Singapore
- Gujarat Sidhee Cement - India
- Rio Tinto Coal - Australia
- Kapuas Tunggal Persada - Indonesia
- GAC Shipping (India) Pvt Ltd
- Jorong Barutama Greston.PT - Indonesia
- Gujarat Mineral Development Corp Ltd - India
- Chamber of Mines of South Africa
- Minerals Council of Australia
- International Coal Ventures Pvt Ltd - India
- CIMB Investment Bank - Malaysia
- Independent Power Producers Association of India
- Carbofer General Trading SA - India
- Baramulti Group, Indonesia
- Karaikal Port Pvt Ltd - India
- GMR Energy Limited - India
- Larsen & Toubro Limited - India
- Indogreen Group - Indonesia
- Offshore Bulk Terminal Pte Ltd, Singapore
- AsiaOL BioFuels Corp., Philippines
- Madhucon Powers Ltd - India
- Uttam Galva Steels Limited - India
- Planning Commission, India
- Bukit Makmur.PT - Indonesia
- Sindya Power Generating Company Private Ltd
- Iligan Light & Power Inc, Philippines
- Global Green Power PLC Corporation, Philippines
- Leighton Contractors Pty Ltd - Australia
- Tamil Nadu electricity Board
- SN Aboitiz Power Inc, Philippines
- Kobexindo Tractors - Indoneisa
- Aboitiz Power Corporation - Philippines
- Asmin Koalindo Tuhup - Indonesia
- Altura Mining Limited, Indonesia
- Kalimantan Lumbung Energi - Indonesia
- Meenaskhi Energy Private Limited - India
- New Zealand Coal & Carbon
- Alfred C Toepfer International GmbH - Germany
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Orica Mining Services - Indonesia
- Coastal Gujarat Power Limited - India
- Therma Luzon, Inc, Philippines
- Electricity Authority, New Zealand
- White Energy Company Limited
- Kaltim Prima Coal - Indonesia
- Bhoruka Overseas - Indonesia
- Posco Energy - South Korea
- Petrochimia International Co. Ltd.- Taiwan
- Central Java Power - Indonesia
- IHS Mccloskey Coal Group - USA
- Power Finance Corporation Ltd., India
- Maheswari Brothers Coal Limited - India
- Petron Corporation, Philippines
- Gujarat Electricity Regulatory Commission - India
- Semirara Mining and Power Corporation, Philippines
- Agrawal Coal Company - India
- Parry Sugars Refinery, India
- Energy Development Corp, Philippines
- Parliament of New Zealand
- Bulk Trading Sa - Switzerland
- Bukit Baiduri Energy - Indonesia
- Siam City Cement PLC, Thailand
- Vizag Seaport Private Limited - India
- The State Trading Corporation of India Ltd
- Indika Energy - Indonesia
- Salva Resources Pvt Ltd - India
- Krishnapatnam Port Company Ltd. - India
- Rashtriya Ispat Nigam Limited - India
- Mercator Lines Limited - India
- Antam Resourcindo - Indonesia
- Sarangani Energy Corporation, Philippines
- London Commodity Brokers - England
- Bangladesh Power Developement Board
- Sakthi Sugars Limited - India
- Bharathi Cement Corporation - India
- Singapore Mercantile Exchange
- Bahari Cakrawala Sebuku - Indonesia
- Kepco SPC Power Corporation, Philippines
- Meralco Power Generation, Philippines
- Timah Investasi Mineral - Indoneisa
- Globalindo Alam Lestari - Indonesia
- Jindal Steel & Power Ltd - India
- Eastern Coal Council - USA
- Ambuja Cements Ltd - India
- European Bulk Services B.V. - Netherlands
- Videocon Industries ltd - India
- SMC Global Power, Philippines
- Marubeni Corporation - India
- SMG Consultants - Indonesia
- Commonwealth Bank - Australia
- PNOC Exploration Corporation - Philippines
- Kohat Cement Company Ltd. - Pakistan
- The University of Queensland
- Kumho Petrochemical, South Korea
- Latin American Coal - Colombia
- Makarim & Taira - Indonesia
- Jaiprakash Power Ventures ltd
- Intertek Mineral Services - Indonesia
- CNBM International Corporation - China
- Riau Bara Harum - Indonesia
- Africa Commodities Group - South Africa
- Standard Chartered Bank - UAE
- Coal and Oil Company - UAE
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