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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, 17 January 23
CHINA'S SHANXI TARGETS 2023 COAL PRODUCTION OF NEARLY 1.37B TONS - XINHUA
China’s coal-rich province of Shanxi has set a coal production target of nearly 1.37 billion metric tons for 2023, according to a government ...
Tuesday, 17 January 23
MARKET INSIGHT - INTERMODAL
Rumor has it that the New Year has come, to set the pace in, for Russia to continue hostilities against Ukraine. Ten months on the go, into Russia& ...
Tuesday, 17 January 23
INDONESIA IS ACCOUNTING FOR 32.3% OF THE GLOBAL SEABORNE COAL MARKET IN 2022 - BENCHERO 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, Benchero ...
Tuesday, 10 January 23
INDONESIAN HBA IS SEEING A SPIKE IN JANUARY 2023 INSTEAD OF A SIGNIFICANT FALL IN DECEMBER 2022
COALspot.com: Indonesian Coal Price Reference up 8.43% in January 2023.
HBA is seeing a dramatic spike in January 2023 i ...
Sunday, 08 January 23
INDIAN COAL POWER PLANTS SHOULD BE COMPENSATED FOR 2022 FORCED GENERATION – REGULATOR : REUTERS
Indian power plants that rely on imported coal should be fully compensated when forced to supply electricity, the country’s power regulator s ...
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- Edison Trading Spa - Italy
- Star Paper Mills Limited - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Maheswari Brothers Coal Limited - India
- Vedanta Resources Plc - India
- Indika Energy - Indonesia
- Interocean Group of Companies - India
- Neyveli Lignite Corporation Ltd, - India
- Mintek Dendrill Indonesia
- Asmin Koalindo Tuhup - Indonesia
- Baramulti Group, Indonesia
- Pendopo Energi Batubara - Indonesia
- Bangladesh Power Developement Board
- OPG Power Generation Pvt Ltd - India
- CNBM International Corporation - China
- GVK Power & Infra Limited - India
- South Luzon Thermal Energy Corporation
- Heidelberg Cement - Germany
- Toyota Tsusho Corporation, Japan
- Siam City Cement - Thailand
- Singapore Mercantile Exchange
- GMR Energy Limited - India
- Indogreen Group - Indonesia
- The State Trading Corporation of India Ltd
- Makarim & Taira - Indonesia
- GN Power Mariveles Coal Plant, Philippines
- Semirara Mining Corp, Philippines
- Chamber of Mines of South Africa
- Vizag Seaport Private Limited - India
- SMC Global Power, Philippines
- Meralco Power Generation, Philippines
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- New Zealand Coal & Carbon
- SN Aboitiz Power Inc, Philippines
- Krishnapatnam Port Company Ltd. - India
- Bhoruka Overseas - Indonesia
- Sinarmas Energy and Mining - Indonesia
- Electricity Generating Authority of Thailand
- LBH Netherlands Bv - Netherlands
- Barasentosa Lestari - Indonesia
- IHS Mccloskey Coal Group - USA
- Kepco SPC Power Corporation, Philippines
- AsiaOL BioFuels Corp., Philippines
- Sarangani Energy Corporation, Philippines
- Minerals Council of Australia
- Eastern Energy - Thailand
- Kapuas Tunggal Persada - Indonesia
- Orica Mining Services - Indonesia
- Siam City Cement PLC, Thailand
- Ind-Barath Power Infra Limited - India
- Salva Resources Pvt Ltd - India
- PTC India Limited - India
- Port Waratah Coal Services - Australia
- Merrill Lynch Commodities Europe
- ASAPP Information Group - India
- Ambuja Cements Ltd - India
- Directorate Of Revenue Intelligence - India
- Therma Luzon, Inc, Philippines
- Anglo American - United Kingdom
- Gujarat Mineral Development Corp Ltd - India
- Directorate General of MIneral and Coal - Indonesia
- Carbofer General Trading SA - India
- Jorong Barutama Greston.PT - Indonesia
- Mercator Lines Limited - India
- The University of Queensland
- Formosa Plastics Group - Taiwan
- Sakthi Sugars Limited - India
- Binh Thuan Hamico - Vietnam
- Wood Mackenzie - Singapore
- Gujarat Sidhee Cement - India
- Madhucon Powers Ltd - India
- Commonwealth Bank - Australia
- Coastal Gujarat Power Limited - India
- Electricity Authority, New Zealand
- MS Steel International - UAE
- Posco Energy - South Korea
- Larsen & Toubro Limited - India
- Sindya Power Generating Company Private Ltd
- PetroVietnam Power Coal Import and Supply Company
- London Commodity Brokers - England
- McConnell Dowell - Australia
- Aditya Birla Group - India
- CIMB Investment Bank - Malaysia
- Bahari Cakrawala Sebuku - Indonesia
- Indian Oil Corporation Limited
- Energy Development Corp, Philippines
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Aboitiz Power Corporation - Philippines
- PowerSource Philippines DevCo
- TNB Fuel Sdn Bhd - Malaysia
- Trasteel International SA, Italy
- Thiess Contractors Indonesia
- Georgia Ports Authority, United States
- Malabar Cements Ltd - India
- Essar Steel Hazira Ltd - India
- European Bulk Services B.V. - Netherlands
- ICICI Bank Limited - India
- Planning Commission, India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Banpu Public Company Limited - Thailand
- Globalindo Alam Lestari - Indonesia
- Uttam Galva Steels Limited - India
- Intertek Mineral Services - Indonesia
- Riau Bara Harum - Indonesia
- Karaikal Port Pvt Ltd - India
- International Coal Ventures Pvt Ltd - India
- Alfred C Toepfer International GmbH - Germany
- Bukit Baiduri Energy - Indonesia
- Parliament of New Zealand
- Indian Energy Exchange, India
- Goldman Sachs - Singapore
- Orica Australia Pty. Ltd.
- Bayan Resources Tbk. - Indonesia
- Romanian Commodities Exchange
- Independent Power Producers Association of India
- Vijayanagar Sugar Pvt Ltd - India
- Pipit Mutiara Jaya. PT, Indonesia
- Marubeni Corporation - India
- Cigading International Bulk Terminal - Indonesia
- Global Business Power Corporation, Philippines
- Videocon Industries ltd - India
- Kideco Jaya Agung - Indonesia
- Central Electricity Authority - India
- Tamil Nadu electricity Board
- Ceylon Electricity Board - Sri Lanka
- Central Java Power - Indonesia
- Mjunction Services Limited - India
- Kumho Petrochemical, South Korea
- IEA Clean Coal Centre - UK
- Africa Commodities Group - South Africa
- Petrochimia International Co. Ltd.- Taiwan
- Global Coal Blending Company Limited - Australia
- Cement Manufacturers Association - India
- Thai Mozambique Logistica
- Xindia Steels Limited - India
- Gujarat Electricity Regulatory Commission - India
- Rashtriya Ispat Nigam Limited - India
- Maharashtra Electricity Regulatory Commission - India
- Jaiprakash Power Ventures ltd
- Meenaskhi Energy Private Limited - India
- Sical Logistics Limited - India
- TeaM Sual Corporation - Philippines
- GAC Shipping (India) Pvt Ltd
- Kobexindo Tractors - Indoneisa
- Australian Coal Association
- Iligan Light & Power Inc, Philippines
- Latin American Coal - Colombia
- Bhatia International Limited - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Straits Asia Resources Limited - Singapore
- Sree Jayajothi Cements Limited - India
- India Bulls Power Limited - India
- Eastern Coal Council - USA
- Tata Chemicals Ltd - India
- Billiton Holdings Pty Ltd - Australia
- Kalimantan Lumbung Energi - Indonesia
- Deloitte Consulting - India
- VISA Power Limited - India
- Standard Chartered Bank - UAE
- Manunggal Multi Energi - Indonesia
- Savvy Resources Ltd - HongKong
- Chettinad Cement Corporation Ltd - India
- Coalindo Energy - Indonesia
- Bulk Trading Sa - Switzerland
- Grasim Industreis Ltd - India
- Bharathi Cement Corporation - India
- Global Green Power PLC Corporation, Philippines
- Ministry of Finance - Indonesia
- Leighton Contractors Pty Ltd - Australia
- Energy Link Ltd, New Zealand
- Semirara Mining and Power Corporation, Philippines
- Borneo Indobara - Indonesia
- Ministry of Mines - Canada
- Price Waterhouse Coopers - Russia
- Agrawal Coal Company - India
- Holcim Trading Pte Ltd - Singapore
- Dalmia Cement Bharat India
- Bhushan Steel Limited - India
- Kohat Cement Company Ltd. - Pakistan
- Antam Resourcindo - Indonesia
- Kartika Selabumi Mining - Indonesia
- Renaissance Capital - South Africa
- Economic Council, Georgia
- PNOC Exploration Corporation - Philippines
- Mercuria Energy - Indonesia
- Ministry of Transport, Egypt
- Bank of Tokyo Mitsubishi UFJ Ltd
- Australian Commodity Traders Exchange
- Karbindo Abesyapradhi - Indoneisa
- Miang Besar Coal Terminal - Indonesia
- Samtan Co., Ltd - South Korea
- Indo Tambangraya Megah - Indonesia
- Kaltim Prima Coal - Indonesia
- Power Finance Corporation Ltd., India
- Bukit Makmur.PT - Indonesia
- White Energy Company Limited
- Oldendorff Carriers - Singapore
- Sojitz Corporation - Japan
- Lanco Infratech Ltd - India
- Coal and Oil Company - UAE
- Jindal Steel & Power Ltd - India
- Altura Mining Limited, Indonesia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Bukit Asam (Persero) Tbk - Indonesia
- Timah Investasi Mineral - Indoneisa
- The Treasury - Australian Government
- San Jose City I Power Corp, Philippines
- Wilmar Investment Holdings
- Medco Energi Mining Internasional
- SMG Consultants - Indonesia
- Indonesian Coal Mining Association
- Rio Tinto Coal - Australia
- Parry Sugars Refinery, India
- Simpson Spence & Young - Indonesia
- Petron Corporation, Philippines
- Metalloyd Limited - United Kingdom
- Attock Cement Pakistan Limited
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