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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, 26 January 23
AUSTRALIA'S CORONADO GLOBAL SEES COAL PRICES RISING ON RESUMING CHINA IMPORTS - REUTERS
Australia’s Coronado Global Resources said on Tuesday resuming metallurgical coal imports to China would likely push sea-borne coal prices hi ...
Monday, 23 January 23
CHINA'S MAJOR COAL-PRODUCING PROVINCE ACCELERATES DIGITAL TRANSFORMATION - XINHUA
At Chindata Group’s big-data industrial park in Lingqiu County of Datong City, hundreds of thousands of servers are running round-the-clock t ...
Monday, 23 January 23
CHINA'S COAL-RICH PROVINCE SEES COAL PRODUCTION INCREASE IN 2022 - XINHUA
North China’s coal-rich province of Shanxi saw its coal production hit 1.31 billion tonnes in 2022, up 8.7 percent year on year, local author ...
Wednesday, 18 January 23
MARKET INSIGHT - INTERMODAL
From Feb 5, another price cap will be introduced to Russian fuels and oil products, adding to the one for crude oil, already in place from Dec. 3. ...
Tuesday, 17 January 23
FRAUD IS THE BIGGEST THREAT TO CARGO LOSSES - TT CLUB
The almost exclusive use of online facilities to process business transactions allows a myriad of fraudulent pursuits to find opportunities within ...
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- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Samtan Co., Ltd - South Korea
- Cement Manufacturers Association - India
- ICICI Bank Limited - India
- Parry Sugars Refinery, India
- Manunggal Multi Energi - Indonesia
- Interocean Group of Companies - India
- Directorate General of MIneral and Coal - Indonesia
- Kobexindo Tractors - Indoneisa
- Parliament of New Zealand
- Semirara Mining Corp, Philippines
- Salva Resources Pvt Ltd - India
- Pendopo Energi Batubara - Indonesia
- Trasteel International SA, Italy
- Bukit Asam (Persero) Tbk - Indonesia
- Oldendorff Carriers - Singapore
- Central Java Power - Indonesia
- Kalimantan Lumbung Energi - Indonesia
- Bhoruka Overseas - Indonesia
- Asmin Koalindo Tuhup - Indonesia
- Mintek Dendrill Indonesia
- Central Electricity Authority - India
- Alfred C Toepfer International GmbH - Germany
- Ministry of Finance - Indonesia
- Siam City Cement PLC, Thailand
- Sindya Power Generating Company Private Ltd
- Energy Development Corp, Philippines
- Baramulti Group, Indonesia
- Vedanta Resources Plc - India
- Kaltim Prima Coal - Indonesia
- Altura Mining Limited, Indonesia
- Xindia Steels Limited - India
- Electricity Generating Authority of Thailand
- IHS Mccloskey Coal Group - USA
- Binh Thuan Hamico - Vietnam
- Kumho Petrochemical, South Korea
- Gujarat Electricity Regulatory Commission - India
- Marubeni Corporation - India
- Malabar Cements Ltd - India
- Australian Coal Association
- CNBM International Corporation - China
- Bukit Makmur.PT - Indonesia
- Barasentosa Lestari - Indonesia
- Sojitz Corporation - Japan
- Bayan Resources Tbk. - Indonesia
- Tamil Nadu electricity Board
- Bank of Tokyo Mitsubishi UFJ Ltd
- London Commodity Brokers - England
- Maharashtra Electricity Regulatory Commission - India
- Global Business Power Corporation, Philippines
- Indo Tambangraya Megah - Indonesia
- GMR Energy Limited - India
- PNOC Exploration Corporation - Philippines
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Sakthi Sugars Limited - India
- TNB Fuel Sdn Bhd - Malaysia
- Meenaskhi Energy Private Limited - India
- Ministry of Transport, Egypt
- Mercuria Energy - Indonesia
- Toyota Tsusho Corporation, Japan
- White Energy Company Limited
- South Luzon Thermal Energy Corporation
- Agrawal Coal Company - India
- McConnell Dowell - Australia
- The University of Queensland
- Videocon Industries ltd - India
- Ambuja Cements Ltd - India
- Star Paper Mills Limited - India
- Independent Power Producers Association of India
- Edison Trading Spa - Italy
- Karbindo Abesyapradhi - Indoneisa
- Goldman Sachs - Singapore
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Energy Link Ltd, New Zealand
- GN Power Mariveles Coal Plant, Philippines
- Petrochimia International Co. Ltd.- Taiwan
- Bhatia International Limited - India
- Wilmar Investment Holdings
- Merrill Lynch Commodities Europe
- Kepco SPC Power Corporation, Philippines
- Indogreen Group - Indonesia
- Africa Commodities Group - South Africa
- Makarim & Taira - Indonesia
- Coal and Oil Company - UAE
- Meralco Power Generation, Philippines
- Formosa Plastics Group - Taiwan
- The Treasury - Australian Government
- Kapuas Tunggal Persada - Indonesia
- Holcim Trading Pte Ltd - Singapore
- Kohat Cement Company Ltd. - Pakistan
- Sarangani Energy Corporation, Philippines
- European Bulk Services B.V. - Netherlands
- Billiton Holdings Pty Ltd - Australia
- Indian Oil Corporation Limited
- Planning Commission, India
- Simpson Spence & Young - Indonesia
- Minerals Council of Australia
- Straits Asia Resources Limited - Singapore
- Renaissance Capital - South Africa
- Antam Resourcindo - Indonesia
- Carbofer General Trading SA - India
- Intertek Mineral Services - Indonesia
- MS Steel International - UAE
- Georgia Ports Authority, United States
- GAC Shipping (India) Pvt Ltd
- Karaikal Port Pvt Ltd - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- SMC Global Power, Philippines
- TeaM Sual Corporation - Philippines
- Economic Council, Georgia
- Commonwealth Bank - Australia
- Australian Commodity Traders Exchange
- Aditya Birla Group - India
- Directorate Of Revenue Intelligence - India
- New Zealand Coal & Carbon
- Bharathi Cement Corporation - India
- PetroVietnam Power Coal Import and Supply Company
- LBH Netherlands Bv - Netherlands
- Gujarat Mineral Development Corp Ltd - India
- Maheswari Brothers Coal Limited - India
- Vijayanagar Sugar Pvt Ltd - India
- Globalindo Alam Lestari - Indonesia
- Eastern Coal Council - USA
- Petron Corporation, Philippines
- Leighton Contractors Pty Ltd - Australia
- SN Aboitiz Power Inc, Philippines
- Semirara Mining and Power Corporation, Philippines
- Bhushan Steel Limited - India
- Essar Steel Hazira Ltd - India
- Aboitiz Power Corporation - Philippines
- Ceylon Electricity Board - Sri Lanka
- Metalloyd Limited - United Kingdom
- Pipit Mutiara Jaya. PT, Indonesia
- Sree Jayajothi Cements Limited - India
- Mjunction Services Limited - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Banpu Public Company Limited - Thailand
- Ministry of Mines - Canada
- Rio Tinto Coal - Australia
- Anglo American - United Kingdom
- Bahari Cakrawala Sebuku - Indonesia
- Gujarat Sidhee Cement - India
- Coastal Gujarat Power Limited - India
- Singapore Mercantile Exchange
- Neyveli Lignite Corporation Ltd, - India
- Mercator Lines Limited - India
- Lanco Infratech Ltd - India
- Madhucon Powers Ltd - India
- Deloitte Consulting - India
- Medco Energi Mining Internasional
- Thiess Contractors Indonesia
- Bangladesh Power Developement Board
- Orica Mining Services - Indonesia
- Indian Energy Exchange, India
- Grasim Industreis Ltd - India
- Bulk Trading Sa - Switzerland
- SMG Consultants - Indonesia
- Ind-Barath Power Infra Limited - India
- International Coal Ventures Pvt Ltd - India
- Larsen & Toubro Limited - India
- Port Waratah Coal Services - Australia
- Heidelberg Cement - Germany
- Sinarmas Energy and Mining - Indonesia
- Tata Chemicals Ltd - India
- Orica Australia Pty. Ltd.
- Jorong Barutama Greston.PT - Indonesia
- IEA Clean Coal Centre - UK
- Power Finance Corporation Ltd., India
- Jaiprakash Power Ventures ltd
- Therma Luzon, Inc, Philippines
- Riau Bara Harum - Indonesia
- Posco Energy - South Korea
- GVK Power & Infra Limited - India
- Borneo Indobara - Indonesia
- Jindal Steel & Power Ltd - India
- OPG Power Generation Pvt Ltd - India
- Romanian Commodities Exchange
- Uttam Galva Steels Limited - India
- Sical Logistics Limited - India
- Price Waterhouse Coopers - Russia
- The State Trading Corporation of India Ltd
- Indika Energy - Indonesia
- Coalindo Energy - Indonesia
- Latin American Coal - Colombia
- Timah Investasi Mineral - Indoneisa
- Savvy Resources Ltd - HongKong
- Kideco Jaya Agung - Indonesia
- CIMB Investment Bank - Malaysia
- Siam City Cement - Thailand
- Krishnapatnam Port Company Ltd. - India
- Thai Mozambique Logistica
- Dalmia Cement Bharat India
- Wood Mackenzie - Singapore
- Electricity Authority, New Zealand
- San Jose City I Power Corp, Philippines
- Chettinad Cement Corporation Ltd - India
- Cigading International Bulk Terminal - Indonesia
- Rashtriya Ispat Nigam Limited - India
- Vizag Seaport Private Limited - India
- Iligan Light & Power Inc, Philippines
- VISA Power Limited - India
- Global Coal Blending Company Limited - Australia
- Indonesian Coal Mining Association
- Miang Besar Coal Terminal - Indonesia
- Attock Cement Pakistan Limited
- AsiaOL BioFuels Corp., Philippines
- Chamber of Mines of South Africa
- PowerSource Philippines DevCo
- ASAPP Information Group - India
- Eastern Energy - Thailand
- Standard Chartered Bank - UAE
- Kartika Selabumi Mining - Indonesia
- India Bulls Power Limited - India
- PTC India Limited - India
- Bukit Baiduri Energy - Indonesia
- Global Green Power PLC Corporation, Philippines
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