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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, 26 February 23
MAWANI AND JEDDAH CHAMBER SIGN AN AGREEMENT TO BUILD INTEGRATED LOGISTICS PARK
Press Release: The Saudi Ports Authority (Mawani) and Jeddah Chamber of Commerce and Industry have today inked an agreement to set up an integrated ...
Saturday, 25 February 23
INDONESIA IS STILL BY FAR THE TOP SUPPLIER OF COAL TO CHINA - 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, said ban ...
Wednesday, 22 February 23
MARKET INSIGHT - INTERMODAL
The short-term outlook of the global soybean market is currently pivoted by a combination of weather patterns that are affecting the harvest progre ...
Saturday, 18 February 23
OIL UNLIKELY TO BREAK ABOVE $100/BBL THIS YEAR, J.P.MORGAN SAYS –- REUTERS
Brent oil prices are unlikely to breach the $100 a barrel level this year, barring any significant geopolitical drivers, with OPEC+ potentially add ...
Saturday, 18 February 23
CHINA'S COAL PRICES FALL TO 1 YR-LOW, CLOUDING DEMAND AND IMPORT OUTLOOK - REUTERS
China’s thermal coal prices hit their lowest levels in a year this week on rising inventories as domestic mine production is recovering faste ...
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- Posco Energy - South Korea
- Kaltim Prima Coal - Indonesia
- Sojitz Corporation - Japan
- Toyota Tsusho Corporation, Japan
- Global Business Power Corporation, Philippines
- Indonesian Coal Mining Association
- Maharashtra Electricity Regulatory Commission - India
- Bangladesh Power Developement Board
- Samtan Co., Ltd - South Korea
- Indogreen Group - Indonesia
- PowerSource Philippines DevCo
- Central Electricity Authority - India
- Indian Oil Corporation Limited
- GMR Energy Limited - India
- Asmin Koalindo Tuhup - Indonesia
- Pendopo Energi Batubara - Indonesia
- Banpu Public Company Limited - Thailand
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- CIMB Investment Bank - Malaysia
- Sakthi Sugars Limited - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Savvy Resources Ltd - HongKong
- Singapore Mercantile Exchange
- PetroVietnam Power Coal Import and Supply Company
- Karaikal Port Pvt Ltd - India
- Eastern Coal Council - USA
- Cigading International Bulk Terminal - Indonesia
- AsiaOL BioFuels Corp., Philippines
- Parry Sugars Refinery, India
- Rio Tinto Coal - Australia
- Petron Corporation, Philippines
- Coalindo Energy - Indonesia
- Malabar Cements Ltd - India
- Kobexindo Tractors - Indoneisa
- Georgia Ports Authority, United States
- Agrawal Coal Company - India
- Binh Thuan Hamico - Vietnam
- Baramulti Group, Indonesia
- Riau Bara Harum - Indonesia
- Wilmar Investment Holdings
- Meralco Power Generation, Philippines
- VISA Power Limited - India
- Oldendorff Carriers - Singapore
- Billiton Holdings Pty Ltd - Australia
- CNBM International Corporation - China
- Rashtriya Ispat Nigam Limited - India
- Dalmia Cement Bharat India
- Aditya Birla Group - India
- Coastal Gujarat Power Limited - India
- Semirara Mining Corp, Philippines
- Alfred C Toepfer International GmbH - Germany
- Vizag Seaport Private Limited - India
- Bukit Baiduri Energy - Indonesia
- Videocon Industries ltd - India
- Renaissance Capital - South Africa
- Salva Resources Pvt Ltd - India
- Heidelberg Cement - Germany
- Kartika Selabumi Mining - Indonesia
- Parliament of New Zealand
- Romanian Commodities Exchange
- Altura Mining Limited, Indonesia
- Chamber of Mines of South Africa
- MS Steel International - UAE
- Simpson Spence & Young - Indonesia
- Mintek Dendrill Indonesia
- Marubeni Corporation - India
- Indika Energy - Indonesia
- Xindia Steels Limited - India
- Energy Link Ltd, New Zealand
- Power Finance Corporation Ltd., India
- Formosa Plastics Group - Taiwan
- Orica Mining Services - Indonesia
- Sarangani Energy Corporation, Philippines
- Ministry of Transport, Egypt
- Meenaskhi Energy Private Limited - India
- Latin American Coal - Colombia
- Miang Besar Coal Terminal - Indonesia
- Ministry of Mines - Canada
- Energy Development Corp, Philippines
- New Zealand Coal & Carbon
- IHS Mccloskey Coal Group - USA
- SMG Consultants - Indonesia
- Uttam Galva Steels Limited - India
- Sical Logistics Limited - India
- Sinarmas Energy and Mining - Indonesia
- Tata Chemicals Ltd - India
- Gujarat Mineral Development Corp Ltd - India
- Indian Energy Exchange, India
- Deloitte Consulting - India
- Trasteel International SA, Italy
- Borneo Indobara - Indonesia
- Larsen & Toubro Limited - India
- Holcim Trading Pte Ltd - Singapore
- Central Java Power - Indonesia
- Thai Mozambique Logistica
- Lanco Infratech Ltd - India
- White Energy Company Limited
- Siam City Cement PLC, Thailand
- Kalimantan Lumbung Energi - Indonesia
- Bhoruka Overseas - Indonesia
- Australian Coal Association
- South Luzon Thermal Energy Corporation
- Star Paper Mills Limited - India
- Cement Manufacturers Association - India
- Bulk Trading Sa - Switzerland
- Economic Council, Georgia
- Australian Commodity Traders Exchange
- Aboitiz Power Corporation - Philippines
- Orica Australia Pty. Ltd.
- Kumho Petrochemical, South Korea
- Merrill Lynch Commodities Europe
- Gujarat Sidhee Cement - India
- Vijayanagar Sugar Pvt Ltd - India
- Jaiprakash Power Ventures ltd
- European Bulk Services B.V. - Netherlands
- Anglo American - United Kingdom
- Antam Resourcindo - Indonesia
- Tamil Nadu electricity Board
- Sindya Power Generating Company Private Ltd
- GVK Power & Infra Limited - India
- Neyveli Lignite Corporation Ltd, - India
- International Coal Ventures Pvt Ltd - India
- Attock Cement Pakistan Limited
- Siam City Cement - Thailand
- Port Waratah Coal Services - Australia
- Makarim & Taira - Indonesia
- ASAPP Information Group - India
- Pipit Mutiara Jaya. PT, Indonesia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Therma Luzon, Inc, Philippines
- Goldman Sachs - Singapore
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Eastern Energy - Thailand
- GN Power Mariveles Coal Plant, Philippines
- Edison Trading Spa - Italy
- Planning Commission, India
- Sree Jayajothi Cements Limited - India
- Kapuas Tunggal Persada - Indonesia
- Leighton Contractors Pty Ltd - Australia
- Barasentosa Lestari - Indonesia
- Metalloyd Limited - United Kingdom
- Thiess Contractors Indonesia
- Globalindo Alam Lestari - Indonesia
- Vedanta Resources Plc - India
- Semirara Mining and Power Corporation, Philippines
- Essar Steel Hazira Ltd - India
- Mjunction Services Limited - India
- Indo Tambangraya Megah - Indonesia
- SN Aboitiz Power Inc, Philippines
- Kideco Jaya Agung - Indonesia
- Karbindo Abesyapradhi - Indoneisa
- ICICI Bank Limited - India
- Mercator Lines Limited - India
- Coal and Oil Company - UAE
- India Bulls Power Limited - India
- Mercuria Energy - Indonesia
- Timah Investasi Mineral - Indoneisa
- Minerals Council of Australia
- Independent Power Producers Association of India
- Intertek Mineral Services - Indonesia
- Electricity Generating Authority of Thailand
- Directorate General of MIneral and Coal - Indonesia
- Ministry of Finance - Indonesia
- Jorong Barutama Greston.PT - Indonesia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Straits Asia Resources Limited - Singapore
- Ind-Barath Power Infra Limited - India
- TNB Fuel Sdn Bhd - Malaysia
- Carbofer General Trading SA - India
- Iligan Light & Power Inc, Philippines
- Gujarat Electricity Regulatory Commission - India
- Jindal Steel & Power Ltd - India
- LBH Netherlands Bv - Netherlands
- Bhushan Steel Limited - India
- GAC Shipping (India) Pvt Ltd
- Directorate Of Revenue Intelligence - India
- Bukit Makmur.PT - Indonesia
- OPG Power Generation Pvt Ltd - India
- Grasim Industreis Ltd - India
- Madhucon Powers Ltd - India
- Global Coal Blending Company Limited - Australia
- Ceylon Electricity Board - Sri Lanka
- London Commodity Brokers - England
- The Treasury - Australian Government
- Kepco SPC Power Corporation, Philippines
- San Jose City I Power Corp, Philippines
- The State Trading Corporation of India Ltd
- Chettinad Cement Corporation Ltd - India
- Commonwealth Bank - Australia
- TeaM Sual Corporation - Philippines
- Petrochimia International Co. Ltd.- Taiwan
- McConnell Dowell - Australia
- Bhatia International Limited - India
- Maheswari Brothers Coal Limited - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- SMC Global Power, Philippines
- Standard Chartered Bank - UAE
- Krishnapatnam Port Company Ltd. - India
- Bukit Asam (Persero) Tbk - Indonesia
- The University of Queensland
- Price Waterhouse Coopers - Russia
- Bahari Cakrawala Sebuku - Indonesia
- Global Green Power PLC Corporation, Philippines
- Interocean Group of Companies - India
- Wood Mackenzie - Singapore
- Electricity Authority, New Zealand
- PNOC Exploration Corporation - Philippines
- IEA Clean Coal Centre - UK
- Manunggal Multi Energi - Indonesia
- PTC India Limited - India
- Ambuja Cements Ltd - India
- Kohat Cement Company Ltd. - Pakistan
- Bharathi Cement Corporation - India
- Africa Commodities Group - South Africa
- Medco Energi Mining Internasional
- Bayan Resources Tbk. - Indonesia
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