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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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Saturday, 25 March 23
COAL INDIA HAS STRONG CASE TO INCREASE PRICES, TALKS ON: CMD AGRAWAL - BUSINESS STANDARD
Coal India (CIL) Chairman and Managing Director Pramod Agrawal said on Monday there is a “strong case” for increasing coal prices, and ...
Saturday, 25 March 23
ASIAN CRUDE PALM OIL WATCH 1Q23 - FITCH RATINGS
Malaysian benchmark crude palm oil (CPO) spot prices have averaged around USD915 per tonne (t) so far in 1Q23, sharply lower than the average of ar ...
Saturday, 25 March 23
INDONESIA’S COAL EXPORT INCREASED BY 21.0% YOY TO 388.4 MLN T IN 2022 - BANCHERO COSTA
After a slow start in the first quarter, global coal trade has really picked up pace last year, and is now fully back to pre-Covid levels. In the f ...
Saturday, 25 March 23
GLOBAL LNG-ASIA SPOT PRICES SLIP AS WEAK NORTHERN DEMAND REMAINS - REUTERS
Asian spot prices of liquefied natural gas (LNG) declined this week, falling to a 21-month low, as weak demand in the northeast Asia region continu ...
Wednesday, 22 March 23
OIL PRICE FALL SPECULATIVE, TO HIT $140 BY YEAR-END -ANDURAND: REUTERS
The recent fall in oil prices due to banking jitters is speculative and oil will hit $140 a barrel by the end of the year, hedge fund manager Pierr ...
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- Alfred C Toepfer International GmbH - Germany
- Asmin Koalindo Tuhup - Indonesia
- The University of Queensland
- SN Aboitiz Power Inc, Philippines
- Gujarat Mineral Development Corp Ltd - India
- Renaissance Capital - South Africa
- Neyveli Lignite Corporation Ltd, - India
- Central Java Power - Indonesia
- Mercator Lines Limited - India
- Standard Chartered Bank - UAE
- Minerals Council of Australia
- CIMB Investment Bank - Malaysia
- Parliament of New Zealand
- Bulk Trading Sa - Switzerland
- Romanian Commodities Exchange
- OPG Power Generation Pvt Ltd - India
- Ministry of Transport, Egypt
- Pendopo Energi Batubara - Indonesia
- Agrawal Coal Company - India
- Merrill Lynch Commodities Europe
- San Jose City I Power Corp, Philippines
- Kalimantan Lumbung Energi - Indonesia
- Port Waratah Coal Services - Australia
- Energy Link Ltd, New Zealand
- Bhoruka Overseas - Indonesia
- Bukit Asam (Persero) Tbk - Indonesia
- VISA Power Limited - India
- Timah Investasi Mineral - Indoneisa
- Essar Steel Hazira Ltd - India
- TeaM Sual Corporation - Philippines
- Straits Asia Resources Limited - Singapore
- PetroVietnam Power Coal Import and Supply Company
- Sakthi Sugars Limited - India
- White Energy Company Limited
- Ministry of Finance - Indonesia
- Globalindo Alam Lestari - Indonesia
- The Treasury - Australian Government
- Kohat Cement Company Ltd. - Pakistan
- Xindia Steels Limited - India
- Global Green Power PLC Corporation, Philippines
- Semirara Mining and Power Corporation, Philippines
- Mjunction Services Limited - India
- Energy Development Corp, Philippines
- Kobexindo Tractors - Indoneisa
- European Bulk Services B.V. - Netherlands
- Eastern Energy - Thailand
- Indo Tambangraya Megah - Indonesia
- Deloitte Consulting - India
- Kaltim Prima Coal - Indonesia
- Tata Chemicals Ltd - India
- McConnell Dowell - Australia
- Malabar Cements Ltd - India
- Makarim & Taira - Indonesia
- Indian Oil Corporation Limited
- Sindya Power Generating Company Private Ltd
- India Bulls Power Limited - India
- Orica Australia Pty. Ltd.
- Gujarat Sidhee Cement - India
- Ministry of Mines - Canada
- Edison Trading Spa - Italy
- Videocon Industries ltd - India
- Coastal Gujarat Power Limited - India
- Ceylon Electricity Board - Sri Lanka
- Cement Manufacturers Association - India
- Bahari Cakrawala Sebuku - Indonesia
- IEA Clean Coal Centre - UK
- GN Power Mariveles Coal Plant, Philippines
- Chamber of Mines of South Africa
- Sinarmas Energy and Mining - Indonesia
- Maheswari Brothers Coal Limited - India
- Orica Mining Services - Indonesia
- Africa Commodities Group - South Africa
- Meenaskhi Energy Private Limited - India
- Ambuja Cements Ltd - India
- Bhushan Steel Limited - India
- Oldendorff Carriers - Singapore
- Savvy Resources Ltd - HongKong
- GMR Energy Limited - India
- Rashtriya Ispat Nigam Limited - India
- Intertek Mineral Services - Indonesia
- Electricity Generating Authority of Thailand
- AsiaOL BioFuels Corp., Philippines
- Therma Luzon, Inc, Philippines
- Anglo American - United Kingdom
- Vijayanagar Sugar Pvt Ltd - India
- LBH Netherlands Bv - Netherlands
- Attock Cement Pakistan Limited
- Gujarat Electricity Regulatory Commission - India
- Jorong Barutama Greston.PT - Indonesia
- Siam City Cement PLC, Thailand
- Jindal Steel & Power Ltd - India
- Directorate General of MIneral and Coal - Indonesia
- Iligan Light & Power Inc, Philippines
- Binh Thuan Hamico - Vietnam
- Bhatia International Limited - India
- Siam City Cement - Thailand
- Georgia Ports Authority, United States
- PTC India Limited - India
- Wilmar Investment Holdings
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Economic Council, Georgia
- Metalloyd Limited - United Kingdom
- Planning Commission, India
- Electricity Authority, New Zealand
- Antam Resourcindo - Indonesia
- Vedanta Resources Plc - India
- Kepco SPC Power Corporation, Philippines
- TNB Fuel Sdn Bhd - Malaysia
- London Commodity Brokers - England
- ASAPP Information Group - India
- Bukit Baiduri Energy - Indonesia
- Toyota Tsusho Corporation, Japan
- Altura Mining Limited, Indonesia
- Heidelberg Cement - Germany
- Posco Energy - South Korea
- Karbindo Abesyapradhi - Indoneisa
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- MS Steel International - UAE
- Bukit Makmur.PT - Indonesia
- GAC Shipping (India) Pvt Ltd
- Thai Mozambique Logistica
- Sojitz Corporation - Japan
- SMG Consultants - Indonesia
- Barasentosa Lestari - Indonesia
- Bank of Tokyo Mitsubishi UFJ Ltd
- Coalindo Energy - Indonesia
- IHS Mccloskey Coal Group - USA
- Price Waterhouse Coopers - Russia
- Chettinad Cement Corporation Ltd - India
- Petron Corporation, Philippines
- Independent Power Producers Association of India
- Directorate Of Revenue Intelligence - India
- Meralco Power Generation, Philippines
- Global Business Power Corporation, Philippines
- Goldman Sachs - Singapore
- Eastern Coal Council - USA
- Semirara Mining Corp, Philippines
- Star Paper Mills Limited - India
- Wood Mackenzie - Singapore
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Uttam Galva Steels Limited - India
- PNOC Exploration Corporation - Philippines
- Bangladesh Power Developement Board
- Holcim Trading Pte Ltd - Singapore
- Trasteel International SA, Italy
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Sree Jayajothi Cements Limited - India
- PowerSource Philippines DevCo
- Simpson Spence & Young - Indonesia
- Vizag Seaport Private Limited - India
- Thiess Contractors Indonesia
- GVK Power & Infra Limited - India
- Leighton Contractors Pty Ltd - Australia
- Mintek Dendrill Indonesia
- Larsen & Toubro Limited - India
- Pipit Mutiara Jaya. PT, Indonesia
- SMC Global Power, Philippines
- Cigading International Bulk Terminal - Indonesia
- Salva Resources Pvt Ltd - India
- Aboitiz Power Corporation - Philippines
- Power Finance Corporation Ltd., India
- Formosa Plastics Group - Taiwan
- Lanco Infratech Ltd - India
- Manunggal Multi Energi - Indonesia
- Samtan Co., Ltd - South Korea
- Kideco Jaya Agung - Indonesia
- Central Electricity Authority - India
- Ind-Barath Power Infra Limited - India
- Maharashtra Electricity Regulatory Commission - India
- ICICI Bank Limited - India
- Medco Energi Mining Internasional
- Marubeni Corporation - India
- Riau Bara Harum - Indonesia
- Jaiprakash Power Ventures ltd
- Offshore Bulk Terminal Pte Ltd, Singapore
- The State Trading Corporation of India Ltd
- Indogreen Group - Indonesia
- Latin American Coal - Colombia
- Commonwealth Bank - Australia
- Sarangani Energy Corporation, Philippines
- Carbofer General Trading SA - India
- Mercuria Energy - Indonesia
- Karaikal Port Pvt Ltd - India
- Madhucon Powers Ltd - India
- Miang Besar Coal Terminal - Indonesia
- Interocean Group of Companies - India
- South Luzon Thermal Energy Corporation
- Singapore Mercantile Exchange
- Tamil Nadu electricity Board
- Aditya Birla Group - India
- Coal and Oil Company - UAE
- Rio Tinto Coal - Australia
- Australian Commodity Traders Exchange
- Banpu Public Company Limited - Thailand
- Krishnapatnam Port Company Ltd. - India
- Borneo Indobara - Indonesia
- Kapuas Tunggal Persada - Indonesia
- Kumho Petrochemical, South Korea
- New Zealand Coal & Carbon
- Baramulti Group, Indonesia
- Kartika Selabumi Mining - Indonesia
- Indika Energy - Indonesia
- Indian Energy Exchange, India
- Global Coal Blending Company Limited - Australia
- Indonesian Coal Mining Association
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Bayan Resources Tbk. - Indonesia
- International Coal Ventures Pvt Ltd - India
- Grasim Industreis Ltd - India
- Australian Coal Association
- Dalmia Cement Bharat India
- Bharathi Cement Corporation - India
- Parry Sugars Refinery, India
- Billiton Holdings Pty Ltd - Australia
- Sical Logistics Limited - India
- CNBM International Corporation - China
- Petrochimia International Co. Ltd.- Taiwan
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