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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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Sunday, 16 April 23
CHINA JUGGLES FOUR MAJOR ECONOMIC CHANGES IN 2023 - WOOD MACKENZIE
Change is afoot in China. Economic growth is slowing, while rising political tensions between China and the US, coupled with global supply chain re ...
Sunday, 16 April 23
CHINA'S MARCH COAL IMPORTS JUMP TO 3-YEAR HIGH - REUTERS
China’s coal imports surged in March to their highest in any month over the past three years as utilities increased purchases on expectations ...
Sunday, 16 April 23
OPEC KEEPS WORLD OIL DEMAND GROWTH OUTLOOK UNCHANGED
The OPEC Reference Basket (ORB) declined in March by $3.43, or 4.2%, m-o-m to average $78.45/b. The ICE Brent first-month contract fell by $4.33, o ...
Sunday, 16 April 23
CHEAPER SPOT LNG PRICES TEMPT SOME ASIAN BUYERS AMID SUPPLY GAINS - REUTERS
Cheaper spot prices for liquefied natural gas (LNG) are luring price-sensitive buyers back in Asia, with China and India recording rising imports i ...
Tuesday, 11 April 23
COAL USE CLIMBS WORLDWIDE DESPITE PROMISES TO SLASH IT - AAP
The burning of coal for electricity, cement, steel and other uses went up in 2022 despite global promises to phase down the fuel that is the bigges ...
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- Kepco SPC Power Corporation, Philippines
- San Jose City I Power Corp, Philippines
- Iligan Light & Power Inc, Philippines
- LBH Netherlands Bv - Netherlands
- Timah Investasi Mineral - Indoneisa
- SN Aboitiz Power Inc, Philippines
- Chamber of Mines of South Africa
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- White Energy Company Limited
- Anglo American - United Kingdom
- PTC India Limited - India
- Standard Chartered Bank - UAE
- Mercuria Energy - Indonesia
- Jorong Barutama Greston.PT - Indonesia
- ASAPP Information Group - India
- Formosa Plastics Group - Taiwan
- Bukit Asam (Persero) Tbk - Indonesia
- PetroVietnam Power Coal Import and Supply Company
- Coalindo Energy - Indonesia
- Renaissance Capital - South Africa
- Gujarat Sidhee Cement - India
- Coal and Oil Company - UAE
- Medco Energi Mining Internasional
- TeaM Sual Corporation - Philippines
- Miang Besar Coal Terminal - Indonesia
- PNOC Exploration Corporation - Philippines
- Electricity Authority, New Zealand
- Economic Council, Georgia
- Jaiprakash Power Ventures ltd
- Directorate Of Revenue Intelligence - India
- Billiton Holdings Pty Ltd - Australia
- Grasim Industreis Ltd - India
- Sindya Power Generating Company Private Ltd
- Indonesian Coal Mining Association
- Ministry of Finance - Indonesia
- Kapuas Tunggal Persada - Indonesia
- Global Green Power PLC Corporation, Philippines
- The State Trading Corporation of India Ltd
- Semirara Mining Corp, Philippines
- Sojitz Corporation - Japan
- Trasteel International SA, Italy
- Metalloyd Limited - United Kingdom
- Electricity Generating Authority of Thailand
- Therma Luzon, Inc, Philippines
- Sarangani Energy Corporation, Philippines
- Vedanta Resources Plc - India
- Indian Oil Corporation Limited
- International Coal Ventures Pvt Ltd - India
- IHS Mccloskey Coal Group - USA
- Asmin Koalindo Tuhup - Indonesia
- Chettinad Cement Corporation Ltd - India
- CIMB Investment Bank - Malaysia
- Central Java Power - Indonesia
- Binh Thuan Hamico - Vietnam
- Bulk Trading Sa - Switzerland
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Uttam Galva Steels Limited - India
- Energy Link Ltd, New Zealand
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Sakthi Sugars Limited - India
- Videocon Industries ltd - India
- Holcim Trading Pte Ltd - Singapore
- Thai Mozambique Logistica
- SMG Consultants - Indonesia
- Indogreen Group - Indonesia
- Heidelberg Cement - Germany
- Bukit Baiduri Energy - Indonesia
- Bayan Resources Tbk. - Indonesia
- Kumho Petrochemical, South Korea
- Parry Sugars Refinery, India
- Salva Resources Pvt Ltd - India
- Parliament of New Zealand
- Marubeni Corporation - India
- Carbofer General Trading SA - India
- Petron Corporation, Philippines
- CNBM International Corporation - China
- Neyveli Lignite Corporation Ltd, - India
- Kohat Cement Company Ltd. - Pakistan
- ICICI Bank Limited - India
- Antam Resourcindo - Indonesia
- Interocean Group of Companies - India
- Malabar Cements Ltd - India
- Intertek Mineral Services - Indonesia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- European Bulk Services B.V. - Netherlands
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Indika Energy - Indonesia
- Offshore Bulk Terminal Pte Ltd, Singapore
- Bukit Makmur.PT - Indonesia
- Cement Manufacturers Association - India
- Petrochimia International Co. Ltd.- Taiwan
- Bhatia International Limited - India
- Globalindo Alam Lestari - Indonesia
- Baramulti Group, Indonesia
- Ministry of Mines - Canada
- Bhoruka Overseas - Indonesia
- IEA Clean Coal Centre - UK
- Indo Tambangraya Megah - Indonesia
- Attock Cement Pakistan Limited
- Deloitte Consulting - India
- Kalimantan Lumbung Energi - Indonesia
- Mercator Lines Limited - India
- OPG Power Generation Pvt Ltd - India
- Borneo Indobara - Indonesia
- Straits Asia Resources Limited - Singapore
- Maharashtra Electricity Regulatory Commission - India
- Maheswari Brothers Coal Limited - India
- Thiess Contractors Indonesia
- Larsen & Toubro Limited - India
- Rio Tinto Coal - Australia
- Agrawal Coal Company - India
- Eastern Energy - Thailand
- AsiaOL BioFuels Corp., Philippines
- Leighton Contractors Pty Ltd - Australia
- Kideco Jaya Agung - Indonesia
- Alfred C Toepfer International GmbH - Germany
- London Commodity Brokers - England
- Meenaskhi Energy Private Limited - India
- Central Electricity Authority - India
- TNB Fuel Sdn Bhd - Malaysia
- Toyota Tsusho Corporation, Japan
- Essar Steel Hazira Ltd - India
- Mintek Dendrill Indonesia
- Kartika Selabumi Mining - Indonesia
- Goldman Sachs - Singapore
- Ministry of Transport, Egypt
- Africa Commodities Group - South Africa
- Rashtriya Ispat Nigam Limited - India
- Australian Coal Association
- Xindia Steels Limited - India
- Gujarat Electricity Regulatory Commission - India
- Australian Commodity Traders Exchange
- Port Waratah Coal Services - Australia
- Karaikal Port Pvt Ltd - India
- Vijayanagar Sugar Pvt Ltd - India
- Meralco Power Generation, Philippines
- Singapore Mercantile Exchange
- New Zealand Coal & Carbon
- Tata Chemicals Ltd - India
- Wilmar Investment Holdings
- Siam City Cement PLC, Thailand
- The University of Queensland
- Energy Development Corp, Philippines
- South Luzon Thermal Energy Corporation
- Pipit Mutiara Jaya. PT, Indonesia
- The Treasury - Australian Government
- Karbindo Abesyapradhi - Indoneisa
- Sree Jayajothi Cements Limited - India
- Kaltim Prima Coal - Indonesia
- Ind-Barath Power Infra Limited - India
- Bahari Cakrawala Sebuku - Indonesia
- Star Paper Mills Limited - India
- Barasentosa Lestari - Indonesia
- Minerals Council of Australia
- Edison Trading Spa - Italy
- GVK Power & Infra Limited - India
- Simpson Spence & Young - Indonesia
- VISA Power Limited - India
- Global Business Power Corporation, Philippines
- Power Finance Corporation Ltd., India
- Directorate General of MIneral and Coal - Indonesia
- Makarim & Taira - Indonesia
- Global Coal Blending Company Limited - Australia
- Sinarmas Energy and Mining - Indonesia
- Siam City Cement - Thailand
- Price Waterhouse Coopers - Russia
- Indian Energy Exchange, India
- Banpu Public Company Limited - Thailand
- Semirara Mining and Power Corporation, Philippines
- Oldendorff Carriers - Singapore
- Aditya Birla Group - India
- Ambuja Cements Ltd - India
- Sical Logistics Limited - India
- Kobexindo Tractors - Indoneisa
- Coastal Gujarat Power Limited - India
- Planning Commission, India
- Posco Energy - South Korea
- Lanco Infratech Ltd - India
- Wood Mackenzie - Singapore
- Merrill Lynch Commodities Europe
- Savvy Resources Ltd - HongKong
- Ceylon Electricity Board - Sri Lanka
- Bangladesh Power Developement Board
- Dalmia Cement Bharat India
- Jindal Steel & Power Ltd - India
- Latin American Coal - Colombia
- Altura Mining Limited, Indonesia
- MS Steel International - UAE
- Independent Power Producers Association of India
- Krishnapatnam Port Company Ltd. - India
- Gujarat Mineral Development Corp Ltd - India
- Georgia Ports Authority, United States
- Bharathi Cement Corporation - India
- Madhucon Powers Ltd - India
- Commonwealth Bank - Australia
- GMR Energy Limited - India
- Bhushan Steel Limited - India
- India Bulls Power Limited - India
- Pendopo Energi Batubara - Indonesia
- Orica Mining Services - Indonesia
- Vizag Seaport Private Limited - India
- Mjunction Services Limited - India
- Eastern Coal Council - USA
- GN Power Mariveles Coal Plant, Philippines
- Samtan Co., Ltd - South Korea
- Aboitiz Power Corporation - Philippines
- Riau Bara Harum - Indonesia
- Tamil Nadu electricity Board
- GAC Shipping (India) Pvt Ltd
- Manunggal Multi Energi - Indonesia
- SMC Global Power, Philippines
- Romanian Commodities Exchange
- Cigading International Bulk Terminal - Indonesia
- PowerSource Philippines DevCo
- Bank of Tokyo Mitsubishi UFJ Ltd
- Orica Australia Pty. Ltd.
- McConnell Dowell - Australia
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