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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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Tuesday, 23 May 23
INDIA: COAL OUTPUT UP 8.9%, SUPPLY RISES 11.7% IN APRIL - FINANCIAL EXPRESS
India’s coal production jumped 8.85% to 73.14 million tonne (MT) in April 2023 and the total coal despatch during the month went up 11.66% to ...
Tuesday, 23 May 23
CHINA COAL OUTPUT UP 4.5 PCT IN APRIL - XINHUA
China’s raw coal output posted stable expansion in April, official data showed.
The country produced 380 million tonnes of raw ...
Saturday, 20 May 23
NON-OPEC OIL SUPPLY DEVELOPMENT - OPEC
In 2022, non-OPEC supply is estimated to have increased by 1.9 mb/d y-o-y. Out of this, US liquids production increased by 1.2 mb/d, mainly on the ...
Saturday, 20 May 23
GLOBAL COAL TRADE HAS REALLY PICKED UP PACE IN RECENT MONTHS, NOW FULLY BACK TO PRE-COVID LEVELS - BANCHERO COSTA
Global coal trade has really picked up pace in recent months, and is now fully back to pre-Covid levels. In Jan-Apr 2023, total global seaborne coa ...
Saturday, 20 May 23
MARKET INSIGHT - INTERMODAL
India is one of the world's largest coal producers and one of the world's largest importers of coal. The country uses coal mainly for power ...
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- Gujarat Electricity Regulatory Commission - India
- Directorate General of MIneral and Coal - Indonesia
- Planning Commission, India
- Rashtriya Ispat Nigam Limited - India
- Xindia Steels Limited - India
- CNBM International Corporation - China
- Savvy Resources Ltd - HongKong
- Trasteel International SA, Italy
- New Zealand Coal & Carbon
- GVK Power & Infra Limited - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Siam City Cement PLC, Thailand
- Sree Jayajothi Cements Limited - India
- Pipit Mutiara Jaya. PT, Indonesia
- Economic Council, Georgia
- Salva Resources Pvt Ltd - India
- Jaiprakash Power Ventures ltd
- International Coal Ventures Pvt Ltd - India
- Sarangani Energy Corporation, Philippines
- Sinarmas Energy and Mining - Indonesia
- Altura Mining Limited, Indonesia
- Jindal Steel & Power Ltd - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Kepco SPC Power Corporation, Philippines
- Kohat Cement Company Ltd. - Pakistan
- IHS Mccloskey Coal Group - USA
- PTC India Limited - India
- Simpson Spence & Young - Indonesia
- Manunggal Multi Energi - Indonesia
- IEA Clean Coal Centre - UK
- Thiess Contractors Indonesia
- Sakthi Sugars Limited - India
- Sojitz Corporation - Japan
- SMC Global Power, Philippines
- MS Steel International - UAE
- Heidelberg Cement - Germany
- TNB Fuel Sdn Bhd - Malaysia
- Globalindo Alam Lestari - Indonesia
- Toyota Tsusho Corporation, Japan
- PNOC Exploration Corporation - Philippines
- Bukit Makmur.PT - Indonesia
- Bukit Baiduri Energy - Indonesia
- Tata Chemicals Ltd - India
- Essar Steel Hazira Ltd - India
- Indian Energy Exchange, India
- Pendopo Energi Batubara - Indonesia
- Standard Chartered Bank - UAE
- Deloitte Consulting - India
- Straits Asia Resources Limited - Singapore
- Power Finance Corporation Ltd., India
- Georgia Ports Authority, United States
- GMR Energy Limited - India
- OPG Power Generation Pvt Ltd - India
- Coalindo Energy - Indonesia
- Posco Energy - South Korea
- Bharathi Cement Corporation - India
- Attock Cement Pakistan Limited
- Electricity Generating Authority of Thailand
- Parry Sugars Refinery, India
- Carbofer General Trading SA - India
- White Energy Company Limited
- Mercuria Energy - Indonesia
- Romanian Commodities Exchange
- Orica Mining Services - Indonesia
- Karbindo Abesyapradhi - Indoneisa
- Maheswari Brothers Coal Limited - India
- Vedanta Resources Plc - India
- Ambuja Cements Ltd - India
- Central Java Power - Indonesia
- Timah Investasi Mineral - Indoneisa
- Binh Thuan Hamico - Vietnam
- South Luzon Thermal Energy Corporation
- Mintek Dendrill Indonesia
- Makarim & Taira - Indonesia
- Krishnapatnam Port Company Ltd. - India
- LBH Netherlands Bv - Netherlands
- Samtan Co., Ltd - South Korea
- The University of Queensland
- Price Waterhouse Coopers - Russia
- Global Coal Blending Company Limited - Australia
- India Bulls Power Limited - India
- Indo Tambangraya Megah - Indonesia
- Electricity Authority, New Zealand
- Cement Manufacturers Association - India
- Ministry of Mines - Canada
- Energy Development Corp, Philippines
- Indika Energy - Indonesia
- Riau Bara Harum - Indonesia
- Aditya Birla Group - India
- Banpu Public Company Limited - Thailand
- Eastern Coal Council - USA
- McConnell Dowell - Australia
- Iligan Light & Power Inc, Philippines
- Baramulti Group, Indonesia
- Bahari Cakrawala Sebuku - Indonesia
- Antam Resourcindo - Indonesia
- SMG Consultants - Indonesia
- Uttam Galva Steels Limited - India
- Renaissance Capital - South Africa
- Dalmia Cement Bharat India
- Wilmar Investment Holdings
- Kideco Jaya Agung - Indonesia
- Oldendorff Carriers - Singapore
- CIMB Investment Bank - Malaysia
- Vizag Seaport Private Limited - India
- Coastal Gujarat Power Limited - India
- Asmin Koalindo Tuhup - Indonesia
- Ministry of Finance - Indonesia
- Mercator Lines Limited - India
- Lanco Infratech Ltd - India
- Kartika Selabumi Mining - Indonesia
- Meenaskhi Energy Private Limited - India
- Star Paper Mills Limited - India
- TeaM Sual Corporation - Philippines
- Kumho Petrochemical, South Korea
- Goldman Sachs - Singapore
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Port Waratah Coal Services - Australia
- PowerSource Philippines DevCo
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Thai Mozambique Logistica
- ASAPP Information Group - India
- Energy Link Ltd, New Zealand
- Chamber of Mines of South Africa
- Karaikal Port Pvt Ltd - India
- Larsen & Toubro Limited - India
- Eastern Energy - Thailand
- Orica Australia Pty. Ltd.
- Semirara Mining Corp, Philippines
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Indogreen Group - Indonesia
- Cigading International Bulk Terminal - Indonesia
- European Bulk Services B.V. - Netherlands
- Aboitiz Power Corporation - Philippines
- Bukit Asam (Persero) Tbk - Indonesia
- Australian Coal Association
- Directorate Of Revenue Intelligence - India
- Billiton Holdings Pty Ltd - Australia
- VISA Power Limited - India
- Australian Commodity Traders Exchange
- Anglo American - United Kingdom
- Kaltim Prima Coal - Indonesia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Edison Trading Spa - Italy
- Bayan Resources Tbk. - Indonesia
- Rio Tinto Coal - Australia
- Metalloyd Limited - United Kingdom
- Indonesian Coal Mining Association
- Agrawal Coal Company - India
- Sical Logistics Limited - India
- AsiaOL BioFuels Corp., Philippines
- Bangladesh Power Developement Board
- Indian Oil Corporation Limited
- Marubeni Corporation - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- Miang Besar Coal Terminal - Indonesia
- Petron Corporation, Philippines
- Central Electricity Authority - India
- Merrill Lynch Commodities Europe
- Commonwealth Bank - Australia
- Maharashtra Electricity Regulatory Commission - India
- Gujarat Mineral Development Corp Ltd - India
- Bhatia International Limited - India
- Bhushan Steel Limited - India
- SN Aboitiz Power Inc, Philippines
- London Commodity Brokers - England
- Therma Luzon, Inc, Philippines
- Ind-Barath Power Infra Limited - India
- Siam City Cement - Thailand
- Meralco Power Generation, Philippines
- The State Trading Corporation of India Ltd
- Intertek Mineral Services - Indonesia
- Bhoruka Overseas - Indonesia
- Madhucon Powers Ltd - India
- Kalimantan Lumbung Energi - Indonesia
- GN Power Mariveles Coal Plant, Philippines
- Neyveli Lignite Corporation Ltd, - India
- Barasentosa Lestari - Indonesia
- Parliament of New Zealand
- The Treasury - Australian Government
- ICICI Bank Limited - India
- Singapore Mercantile Exchange
- Latin American Coal - Colombia
- Medco Energi Mining Internasional
- Malabar Cements Ltd - India
- Ministry of Transport, Egypt
- Independent Power Producers Association of India
- Gujarat Sidhee Cement - India
- Jorong Barutama Greston.PT - Indonesia
- Chettinad Cement Corporation Ltd - India
- PetroVietnam Power Coal Import and Supply Company
- Holcim Trading Pte Ltd - Singapore
- Interocean Group of Companies - India
- Tamil Nadu electricity Board
- Semirara Mining and Power Corporation, Philippines
- Grasim Industreis Ltd - India
- Mjunction Services Limited - India
- Petrochimia International Co. Ltd.- Taiwan
- Videocon Industries ltd - India
- Kapuas Tunggal Persada - Indonesia
- Wood Mackenzie - Singapore
- Alfred C Toepfer International GmbH - Germany
- Kobexindo Tractors - Indoneisa
- Ceylon Electricity Board - Sri Lanka
- Leighton Contractors Pty Ltd - Australia
- Bulk Trading Sa - Switzerland
- GAC Shipping (India) Pvt Ltd
- Formosa Plastics Group - Taiwan
- Global Business Power Corporation, Philippines
- Global Green Power PLC Corporation, Philippines
- Coal and Oil Company - UAE
- San Jose City I Power Corp, Philippines
- Sindya Power Generating Company Private Ltd
- Vijayanagar Sugar Pvt Ltd - India
- Africa Commodities Group - South Africa
- Borneo Indobara - Indonesia
- Minerals Council of Australia
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