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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, 11 April 23
OIL RISES ON CHINA STIMULUS EXPECTATIONS, WEAKER DOLLAR - REUTERS
Oil prices rose on Tuesday on expectations of potential economic stimulus by China, healthy demand in the rest of Asia and a drop in U.S. crude sto ...
Sunday, 09 April 23
CHINA’S BUSINESS INCOME REBOUND POINTS TO IMPROVING ECONOMY: OFFICIAL - XINHUA
Chinese businesses have posted a strong rebound in sales revenue since the beginning of this year in the latest signal of an improving economy.
...
Sunday, 09 April 23
COAL INDIA TO BOOST SUPPLIES TO INDUSTRIES AS UTILITIES’ INVENTORIES RISE - REUTERS
Coal India Ltd will increase supplies to industries, the world’s largest coal miner said on Wednesday as fuel inventories at utilities run by ...
Thursday, 06 April 23
MARKET INSIGHT - INTERMODAL
LNG Current Supply/Demand Dynamics
This year, LNG supply will likely exceed demand, so prices will need to decline to levels that will encourag ...
Sunday, 26 March 23
EUROPE’S RUSH TO LNG COULD TURN INTO 'WORLD’S MOST EXPENSIVE AND UNNECESSARY INSURANCE POLICY'- CNBC
Europe’s rapid buildout of liquefied natural gas infrastructure is on track to far exceed demand by the end of the decade, according to new r ...
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- Alfred C Toepfer International GmbH - Germany
- Bharathi Cement Corporation - India
- Mercuria Energy - Indonesia
- Gujarat Mineral Development Corp Ltd - India
- Makarim & Taira - Indonesia
- Commonwealth Bank - Australia
- Indika Energy - Indonesia
- Gujarat Sidhee Cement - India
- South Luzon Thermal Energy Corporation
- London Commodity Brokers - England
- Miang Besar Coal Terminal - Indonesia
- SMG Consultants - Indonesia
- Cement Manufacturers Association - India
- ICICI Bank Limited - India
- Asmin Koalindo Tuhup - Indonesia
- LBH Netherlands Bv - Netherlands
- Energy Development Corp, Philippines
- Indian Energy Exchange, India
- Cigading International Bulk Terminal - Indonesia
- Marubeni Corporation - India
- PowerSource Philippines DevCo
- Bayan Resources Tbk. - Indonesia
- Bukit Makmur.PT - Indonesia
- Aditya Birla Group - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- TeaM Sual Corporation - Philippines
- Vedanta Resources Plc - India
- PTC India Limited - India
- OPG Power Generation Pvt Ltd - India
- Attock Cement Pakistan Limited
- Madhucon Powers Ltd - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- Meenaskhi Energy Private Limited - India
- Semirara Mining and Power Corporation, Philippines
- Petron Corporation, Philippines
- Anglo American - United Kingdom
- Kobexindo Tractors - Indoneisa
- Karaikal Port Pvt Ltd - India
- Simpson Spence & Young - Indonesia
- MS Steel International - UAE
- Thai Mozambique Logistica
- Heidelberg Cement - Germany
- Bhushan Steel Limited - India
- TNB Fuel Sdn Bhd - Malaysia
- Videocon Industries ltd - India
- Bulk Trading Sa - Switzerland
- Mjunction Services Limited - India
- Thiess Contractors Indonesia
- Larsen & Toubro Limited - India
- Bhoruka Overseas - Indonesia
- Singapore Mercantile Exchange
- Krishnapatnam Port Company Ltd. - India
- IHS Mccloskey Coal Group - USA
- Bangladesh Power Developement Board
- Vijayanagar Sugar Pvt Ltd - India
- Energy Link Ltd, New Zealand
- The University of Queensland
- Interocean Group of Companies - India
- Tata Chemicals Ltd - India
- Price Waterhouse Coopers - Russia
- New Zealand Coal & Carbon
- Globalindo Alam Lestari - Indonesia
- Renaissance Capital - South Africa
- Baramulti Group, Indonesia
- European Bulk Services B.V. - Netherlands
- Independent Power Producers Association of India
- Samtan Co., Ltd - South Korea
- Barasentosa Lestari - Indonesia
- Grasim Industreis Ltd - India
- Electricity Authority, New Zealand
- Sarangani Energy Corporation, Philippines
- Riau Bara Harum - Indonesia
- Siam City Cement PLC, Thailand
- Posco Energy - South Korea
- Toyota Tsusho Corporation, Japan
- CNBM International Corporation - China
- Coal and Oil Company - UAE
- Maheswari Brothers Coal Limited - India
- Sinarmas Energy and Mining - Indonesia
- Intertek Mineral Services - Indonesia
- Electricity Generating Authority of Thailand
- ASAPP Information Group - India
- Metalloyd Limited - United Kingdom
- Rashtriya Ispat Nigam Limited - India
- Jorong Barutama Greston.PT - Indonesia
- Standard Chartered Bank - UAE
- Directorate Of Revenue Intelligence - India
- White Energy Company Limited
- The Treasury - Australian Government
- Dalmia Cement Bharat India
- GAC Shipping (India) Pvt Ltd
- Straits Asia Resources Limited - Singapore
- Billiton Holdings Pty Ltd - Australia
- Gujarat Electricity Regulatory Commission - India
- Global Coal Blending Company Limited - Australia
- Xindia Steels Limited - India
- Manunggal Multi Energi - Indonesia
- Eastern Energy - Thailand
- Port Waratah Coal Services - Australia
- Orica Australia Pty. Ltd.
- Bahari Cakrawala Sebuku - Indonesia
- Aboitiz Power Corporation - Philippines
- Sree Jayajothi Cements Limited - India
- IEA Clean Coal Centre - UK
- Petrochimia International Co. Ltd.- Taiwan
- Kumho Petrochemical, South Korea
- SN Aboitiz Power Inc, Philippines
- Economic Council, Georgia
- PetroVietnam Power Coal Import and Supply Company
- Sakthi Sugars Limited - India
- Parliament of New Zealand
- India Bulls Power Limited - India
- Banpu Public Company Limited - Thailand
- Bukit Asam (Persero) Tbk - Indonesia
- GMR Energy Limited - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Pipit Mutiara Jaya. PT, Indonesia
- Ministry of Mines - Canada
- Jindal Steel & Power Ltd - India
- Trasteel International SA, Italy
- Offshore Bulk Terminal Pte Ltd, Singapore
- Goldman Sachs - Singapore
- San Jose City I Power Corp, Philippines
- Wood Mackenzie - Singapore
- Australian Commodity Traders Exchange
- Salva Resources Pvt Ltd - India
- GN Power Mariveles Coal Plant, Philippines
- Directorate General of MIneral and Coal - Indonesia
- CIMB Investment Bank - Malaysia
- Indonesian Coal Mining Association
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Ambuja Cements Ltd - India
- Sical Logistics Limited - India
- Georgia Ports Authority, United States
- Bhatia International Limited - India
- Leighton Contractors Pty Ltd - Australia
- International Coal Ventures Pvt Ltd - India
- SMC Global Power, Philippines
- Kohat Cement Company Ltd. - Pakistan
- Pendopo Energi Batubara - Indonesia
- Power Finance Corporation Ltd., India
- Kapuas Tunggal Persada - Indonesia
- Kalimantan Lumbung Energi - Indonesia
- Lanco Infratech Ltd - India
- AsiaOL BioFuels Corp., Philippines
- GVK Power & Infra Limited - India
- VISA Power Limited - India
- Coalindo Energy - Indonesia
- Binh Thuan Hamico - Vietnam
- Sojitz Corporation - Japan
- The State Trading Corporation of India Ltd
- Sindya Power Generating Company Private Ltd
- Jaiprakash Power Ventures ltd
- Carbofer General Trading SA - India
- Kaltim Prima Coal - Indonesia
- Kartika Selabumi Mining - Indonesia
- Oldendorff Carriers - Singapore
- Mercator Lines Limited - India
- Chamber of Mines of South Africa
- Deloitte Consulting - India
- Neyveli Lignite Corporation Ltd, - India
- Bukit Baiduri Energy - Indonesia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Eastern Coal Council - USA
- Australian Coal Association
- Latin American Coal - Colombia
- Uttam Galva Steels Limited - India
- Kepco SPC Power Corporation, Philippines
- Iligan Light & Power Inc, Philippines
- Coastal Gujarat Power Limited - India
- Romanian Commodities Exchange
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Merrill Lynch Commodities Europe
- Agrawal Coal Company - India
- Rio Tinto Coal - Australia
- Africa Commodities Group - South Africa
- Vizag Seaport Private Limited - India
- Karbindo Abesyapradhi - Indoneisa
- Semirara Mining Corp, Philippines
- Kideco Jaya Agung - Indonesia
- Antam Resourcindo - Indonesia
- Wilmar Investment Holdings
- Ind-Barath Power Infra Limited - India
- Altura Mining Limited, Indonesia
- Ministry of Finance - Indonesia
- Mintek Dendrill Indonesia
- Ministry of Transport, Egypt
- Minerals Council of Australia
- Edison Trading Spa - Italy
- Orica Mining Services - Indonesia
- Planning Commission, India
- Formosa Plastics Group - Taiwan
- Meralco Power Generation, Philippines
- Borneo Indobara - Indonesia
- Parry Sugars Refinery, India
- Medco Energi Mining Internasional
- Chettinad Cement Corporation Ltd - India
- Indo Tambangraya Megah - Indonesia
- Star Paper Mills Limited - India
- Essar Steel Hazira Ltd - India
- Tamil Nadu electricity Board
- Therma Luzon, Inc, Philippines
- McConnell Dowell - Australia
- Indogreen Group - Indonesia
- Global Business Power Corporation, Philippines
- Malabar Cements Ltd - India
- Savvy Resources Ltd - HongKong
- Central Electricity Authority - India
- Holcim Trading Pte Ltd - Singapore
- Timah Investasi Mineral - Indoneisa
- Maharashtra Electricity Regulatory Commission - India
- Siam City Cement - Thailand
- Ceylon Electricity Board - Sri Lanka
- Indian Oil Corporation Limited
- PNOC Exploration Corporation - Philippines
- Central Java Power - Indonesia
- Global Green Power PLC Corporation, Philippines
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