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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, 02 March 23
DRY BULK MARKET: THE WAY CHINA GOES, SO GOES THE MARKET - BIMCO
We expect demand growth within the 1.5-2.5% range in 2023, driven by China’s economic recovery. Improvements in consumer sentiment should hel ...
Thursday, 02 March 23
INDIA, CHINA DEMAND BOOST LOW-RANK THERMAL COAL PRICES IN ASIA - RUSSELL, REUTERS
Signs of stronger import demand from India have arrested the decline in price of the thermal coal grades most commonly sought by the world’s ...
Thursday, 02 March 23
INDIA CHEERS THE RETURN OF ‘KING COAL’ AS INDUSTRY SEES BUOYANT FUTURE - REUTERS
India’s coal industry celebrated the return of its major conference after a three-year pandemic hiatus by presenting a bullish view of demand ...
Wednesday, 01 March 23
GEO CONNECT ASIA RETURNS IN MARCH TO ACCELERATE THE REGION’S GEOSPATIAL AND LOCATION INTELLIGENCE CAPABILITIES
Press Release: The third edition of GCA will be held in conjunction with Digital Construction Asia and the inaugural Drones Asia – an event d ...
Wednesday, 01 March 23
THE DECLINE IN THE COAL PRICE SINCE THE BEGINNING OF THE YEAR HAS BEEN SIGNIFICANT - INTERMODAL
Last week, the front-month API2 future rose by 3.5%, but since the beginning of the year the future has fallen by 39% to $136.65/t, while the Newca ...
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- Essar Steel Hazira Ltd - India
- India Bulls Power Limited - India
- Cigading International Bulk Terminal - Indonesia
- Makarim & Taira - Indonesia
- Posco Energy - South Korea
- SMC Global Power, Philippines
- Electricity Authority, New Zealand
- Aditya Birla Group - India
- Uttam Galva Steels Limited - India
- PetroVietnam Power Coal Import and Supply Company
- ASAPP Information Group - India
- Medco Energi Mining Internasional
- Bhatia International Limited - India
- Aboitiz Power Corporation - Philippines
- Minerals Council of Australia
- Coastal Gujarat Power Limited - India
- Tata Chemicals Ltd - India
- Directorate General of MIneral and Coal - Indonesia
- Madhucon Powers Ltd - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Agrawal Coal Company - India
- Ind-Barath Power Infra Limited - India
- Coalindo Energy - Indonesia
- Siam City Cement - Thailand
- Global Green Power PLC Corporation, Philippines
- Intertek Mineral Services - Indonesia
- Semirara Mining and Power Corporation, Philippines
- IEA Clean Coal Centre - UK
- McConnell Dowell - Australia
- Planning Commission, India
- Sarangani Energy Corporation, Philippines
- Globalindo Alam Lestari - Indonesia
- Karbindo Abesyapradhi - Indoneisa
- Central Electricity Authority - India
- Bulk Trading Sa - Switzerland
- Petrochimia International Co. Ltd.- Taiwan
- The University of Queensland
- Jaiprakash Power Ventures ltd
- Wood Mackenzie - Singapore
- Ministry of Finance - Indonesia
- IHS Mccloskey Coal Group - USA
- Standard Chartered Bank - UAE
- Therma Luzon, Inc, Philippines
- Carbofer General Trading SA - India
- Electricity Generating Authority of Thailand
- Bukit Baiduri Energy - Indonesia
- Singapore Mercantile Exchange
- Sical Logistics Limited - India
- Energy Link Ltd, New Zealand
- Attock Cement Pakistan Limited
- Meenaskhi Energy Private Limited - India
- Bayan Resources Tbk. - Indonesia
- PTC India Limited - India
- Timah Investasi Mineral - Indoneisa
- Meralco Power Generation, Philippines
- Africa Commodities Group - South Africa
- Neyveli Lignite Corporation Ltd, - India
- Deloitte Consulting - India
- The Treasury - Australian Government
- Interocean Group of Companies - India
- Borneo Indobara - Indonesia
- Maharashtra Electricity Regulatory Commission - India
- Kepco SPC Power Corporation, Philippines
- PNOC Exploration Corporation - Philippines
- Karaikal Port Pvt Ltd - India
- Sojitz Corporation - Japan
- GAC Shipping (India) Pvt Ltd
- Xindia Steels Limited - India
- Global Coal Blending Company Limited - Australia
- GMR Energy Limited - India
- Baramulti Group, Indonesia
- Pendopo Energi Batubara - Indonesia
- Salva Resources Pvt Ltd - India
- New Zealand Coal & Carbon
- Sree Jayajothi Cements Limited - India
- Heidelberg Cement - Germany
- Metalloyd Limited - United Kingdom
- Oldendorff Carriers - Singapore
- Manunggal Multi Energi - Indonesia
- Vedanta Resources Plc - India
- Goldman Sachs - Singapore
- Asmin Koalindo Tuhup - Indonesia
- Miang Besar Coal Terminal - Indonesia
- Parliament of New Zealand
- MS Steel International - UAE
- Australian Coal Association
- SMG Consultants - Indonesia
- SN Aboitiz Power Inc, Philippines
- Barasentosa Lestari - Indonesia
- Thiess Contractors Indonesia
- Mercator Lines Limited - India
- Straits Asia Resources Limited - Singapore
- Malabar Cements Ltd - India
- Indian Oil Corporation Limited
- Larsen & Toubro Limited - India
- Kalimantan Lumbung Energi - Indonesia
- Gujarat Electricity Regulatory Commission - India
- Jorong Barutama Greston.PT - Indonesia
- Indonesian Coal Mining Association
- Antam Resourcindo - Indonesia
- Bahari Cakrawala Sebuku - Indonesia
- Pipit Mutiara Jaya. PT, Indonesia
- Mintek Dendrill Indonesia
- Sakthi Sugars Limited - India
- AsiaOL BioFuels Corp., Philippines
- Rio Tinto Coal - Australia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Independent Power Producers Association of India
- Bharathi Cement Corporation - India
- Parry Sugars Refinery, India
- Billiton Holdings Pty Ltd - Australia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- International Coal Ventures Pvt Ltd - India
- Cement Manufacturers Association - India
- Indian Energy Exchange, India
- Dalmia Cement Bharat India
- Maheswari Brothers Coal Limited - India
- VISA Power Limited - India
- Ministry of Mines - Canada
- Savvy Resources Ltd - HongKong
- Orica Australia Pty. Ltd.
- Simpson Spence & Young - Indonesia
- Commonwealth Bank - Australia
- Directorate Of Revenue Intelligence - India
- Binh Thuan Hamico - Vietnam
- Indo Tambangraya Megah - Indonesia
- Petron Corporation, Philippines
- Gujarat Mineral Development Corp Ltd - India
- Vizag Seaport Private Limited - India
- PowerSource Philippines DevCo
- Energy Development Corp, Philippines
- The State Trading Corporation of India Ltd
- White Energy Company Limited
- Sindya Power Generating Company Private Ltd
- GVK Power & Infra Limited - India
- Renaissance Capital - South Africa
- Edison Trading Spa - Italy
- Sinarmas Energy and Mining - Indonesia
- Bhushan Steel Limited - India
- Merrill Lynch Commodities Europe
- Tamil Nadu electricity Board
- ICICI Bank Limited - India
- Power Finance Corporation Ltd., India
- London Commodity Brokers - England
- Siam City Cement PLC, Thailand
- Semirara Mining Corp, Philippines
- CIMB Investment Bank - Malaysia
- Eastern Coal Council - USA
- Bukit Makmur.PT - Indonesia
- Videocon Industries ltd - India
- Indika Energy - Indonesia
- Bangladesh Power Developement Board
- OPG Power Generation Pvt Ltd - India
- Port Waratah Coal Services - Australia
- Kapuas Tunggal Persada - Indonesia
- Ambuja Cements Ltd - India
- Ministry of Transport, Egypt
- Trasteel International SA, Italy
- Grasim Industreis Ltd - India
- Chettinad Cement Corporation Ltd - India
- Bhoruka Overseas - Indonesia
- South Luzon Thermal Energy Corporation
- Thai Mozambique Logistica
- Latin American Coal - Colombia
- Vijayanagar Sugar Pvt Ltd - India
- Lanco Infratech Ltd - India
- Marubeni Corporation - India
- Australian Commodity Traders Exchange
- European Bulk Services B.V. - Netherlands
- Jindal Steel & Power Ltd - India
- Rashtriya Ispat Nigam Limited - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Orica Mining Services - Indonesia
- Kaltim Prima Coal - Indonesia
- Ceylon Electricity Board - Sri Lanka
- Wilmar Investment Holdings
- Altura Mining Limited, Indonesia
- Iligan Light & Power Inc, Philippines
- Toyota Tsusho Corporation, Japan
- LBH Netherlands Bv - Netherlands
- Bank of Tokyo Mitsubishi UFJ Ltd
- Leighton Contractors Pty Ltd - Australia
- San Jose City I Power Corp, Philippines
- GN Power Mariveles Coal Plant, Philippines
- Indogreen Group - Indonesia
- Kartika Selabumi Mining - Indonesia
- Gujarat Sidhee Cement - India
- TNB Fuel Sdn Bhd - Malaysia
- Anglo American - United Kingdom
- Kumho Petrochemical, South Korea
- Coal and Oil Company - UAE
- Mjunction Services Limited - India
- Price Waterhouse Coopers - Russia
- Kobexindo Tractors - Indoneisa
- Riau Bara Harum - Indonesia
- Chamber of Mines of South Africa
- Kohat Cement Company Ltd. - Pakistan
- Kideco Jaya Agung - Indonesia
- Holcim Trading Pte Ltd - Singapore
- Bukit Asam (Persero) Tbk - Indonesia
- TeaM Sual Corporation - Philippines
- Romanian Commodities Exchange
- Georgia Ports Authority, United States
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- CNBM International Corporation - China
- Krishnapatnam Port Company Ltd. - India
- Eastern Energy - Thailand
- Banpu Public Company Limited - Thailand
- Samtan Co., Ltd - South Korea
- Formosa Plastics Group - Taiwan
- Alfred C Toepfer International GmbH - Germany
- Central Java Power - Indonesia
- Economic Council, Georgia
- Star Paper Mills Limited - India
- Global Business Power Corporation, Philippines
- Mercuria Energy - Indonesia
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