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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, 22 December 22
RUSSIAN OIL EXPORTS CRATER BY 54% IN THE FIRST FULL WEEK OF THE EU'S EMBARGO AMID A SHORTAGE OF TANKERS WILLING TO CARRY CARGOES - BUSINESS INSIDER
Since the European Union imposed its seaborne crude sanctions, Russian oil exports have tumbled by more than half, according to data compiled by Bl ...
Thursday, 22 December 22
CHINA TIGHTENS VERIFICATION OF SHIPS’ ENERGY CONSUMPTION DATA - GARD
From 22 December 2022, ships trading to Chinese ports must record their energy consumption data in accordance with the requirements of their Ship E ...
Thursday, 22 December 22
AN OVERVIEW OF THE LNG MARKET - VESSELSVALUE
LNG values have continued to strengthen, spurred by skyrocketing earnings that have surpassed last year’s record breaking peaks. In November, ...
Thursday, 22 December 22
COKING COAL SLUMPS AS TALKS ON AUSTRALIA-CHINA TRADE RIFT LOOM - REUTERS
Chinese coking coal futures dropped more than 3 per cent on Tuesday (Dec 20), extending losses, as supply of the steelmaking input might increase i ...
Thursday, 22 December 22
COAL AND GAS PRICE CAPS MAY COMPOUND POLITICAL RISK FOR AUSTRALIAN CORPORATES - FITCH RATINGS
Australia’s introduction of temporary price caps on domestic sales of gas and coal used for electricity generation will probably have limited ...
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- Sarangani Energy Corporation, Philippines
- Romanian Commodities Exchange
- AsiaOL BioFuels Corp., Philippines
- Videocon Industries ltd - India
- Sakthi Sugars Limited - India
- Energy Link Ltd, New Zealand
- Sojitz Corporation - Japan
- New Zealand Coal & Carbon
- Edison Trading Spa - Italy
- Madhucon Powers Ltd - India
- Directorate General of MIneral and Coal - Indonesia
- South Luzon Thermal Energy Corporation
- Bayan Resources Tbk. - Indonesia
- The University of Queensland
- Power Finance Corporation Ltd., India
- Vijayanagar Sugar Pvt Ltd - India
- Wood Mackenzie - Singapore
- Coal and Oil Company - UAE
- Marubeni Corporation - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Altura Mining Limited, Indonesia
- CNBM International Corporation - China
- Agrawal Coal Company - India
- Global Green Power PLC Corporation, Philippines
- GMR Energy Limited - India
- Karaikal Port Pvt Ltd - India
- Larsen & Toubro Limited - India
- PNOC Exploration Corporation - Philippines
- Baramulti Group, Indonesia
- Singapore Mercantile Exchange
- Coalindo Energy - Indonesia
- Timah Investasi Mineral - Indoneisa
- Orica Australia Pty. Ltd.
- Essar Steel Hazira Ltd - India
- Toyota Tsusho Corporation, Japan
- Ambuja Cements Ltd - India
- Coastal Gujarat Power Limited - India
- Indonesian Coal Mining Association
- PTC India Limited - India
- Miang Besar Coal Terminal - Indonesia
- Meralco Power Generation, Philippines
- Barasentosa Lestari - Indonesia
- SMG Consultants - Indonesia
- Medco Energi Mining Internasional
- Pipit Mutiara Jaya. PT, Indonesia
- Global Coal Blending Company Limited - Australia
- Karbindo Abesyapradhi - Indoneisa
- Holcim Trading Pte Ltd - Singapore
- ASAPP Information Group - India
- Mercator Lines Limited - India
- Pendopo Energi Batubara - Indonesia
- Intertek Mineral Services - Indonesia
- Carbofer General Trading SA - India
- Price Waterhouse Coopers - Russia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Parry Sugars Refinery, India
- Malabar Cements Ltd - India
- Bukit Baiduri Energy - Indonesia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Renaissance Capital - South Africa
- Jorong Barutama Greston.PT - Indonesia
- Georgia Ports Authority, United States
- Siam City Cement - Thailand
- Bhatia International Limited - India
- Straits Asia Resources Limited - Singapore
- Minerals Council of Australia
- Simpson Spence & Young - Indonesia
- Ministry of Transport, Egypt
- Semirara Mining Corp, Philippines
- Petron Corporation, Philippines
- Kobexindo Tractors - Indoneisa
- GVK Power & Infra Limited - India
- Port Waratah Coal Services - Australia
- Lanco Infratech Ltd - India
- Indogreen Group - Indonesia
- Jaiprakash Power Ventures ltd
- OPG Power Generation Pvt Ltd - India
- Planning Commission, India
- Petrochimia International Co. Ltd.- Taiwan
- Ind-Barath Power Infra Limited - India
- India Bulls Power Limited - India
- Aboitiz Power Corporation - Philippines
- Trasteel International SA, Italy
- Sree Jayajothi Cements Limited - India
- Tata Chemicals Ltd - India
- Central Java Power - Indonesia
- Krishnapatnam Port Company Ltd. - India
- MS Steel International - UAE
- International Coal Ventures Pvt Ltd - India
- Rashtriya Ispat Nigam Limited - India
- Sical Logistics Limited - India
- Jindal Steel & Power Ltd - India
- Electricity Authority, New Zealand
- Asmin Koalindo Tuhup - Indonesia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Therma Luzon, Inc, Philippines
- IHS Mccloskey Coal Group - USA
- London Commodity Brokers - England
- Rio Tinto Coal - Australia
- Cigading International Bulk Terminal - Indonesia
- Eastern Coal Council - USA
- Sinarmas Energy and Mining - Indonesia
- Bharathi Cement Corporation - India
- PetroVietnam Power Coal Import and Supply Company
- Australian Commodity Traders Exchange
- Borneo Indobara - Indonesia
- Ceylon Electricity Board - Sri Lanka
- CIMB Investment Bank - Malaysia
- Mercuria Energy - Indonesia
- Grasim Industreis Ltd - India
- Anglo American - United Kingdom
- Global Business Power Corporation, Philippines
- Siam City Cement PLC, Thailand
- Alfred C Toepfer International GmbH - Germany
- Mintek Dendrill Indonesia
- Indika Energy - Indonesia
- Neyveli Lignite Corporation Ltd, - India
- Maheswari Brothers Coal Limited - India
- Australian Coal Association
- Indo Tambangraya Megah - Indonesia
- Latin American Coal - Colombia
- Gujarat Electricity Regulatory Commission - India
- Electricity Generating Authority of Thailand
- Standard Chartered Bank - UAE
- Kartika Selabumi Mining - Indonesia
- Billiton Holdings Pty Ltd - Australia
- Makarim & Taira - Indonesia
- The Treasury - Australian Government
- Uttam Galva Steels Limited - India
- Kepco SPC Power Corporation, Philippines
- Wilmar Investment Holdings
- Bulk Trading Sa - Switzerland
- LBH Netherlands Bv - Netherlands
- Dalmia Cement Bharat India
- Banpu Public Company Limited - Thailand
- Xindia Steels Limited - India
- Samtan Co., Ltd - South Korea
- Bahari Cakrawala Sebuku - Indonesia
- Kaltim Prima Coal - Indonesia
- Maharashtra Electricity Regulatory Commission - India
- Bhushan Steel Limited - India
- Savvy Resources Ltd - HongKong
- Cement Manufacturers Association - India
- Sindya Power Generating Company Private Ltd
- Independent Power Producers Association of India
- European Bulk Services B.V. - Netherlands
- Directorate Of Revenue Intelligence - India
- Gujarat Mineral Development Corp Ltd - India
- Leighton Contractors Pty Ltd - Australia
- SMC Global Power, Philippines
- Mjunction Services Limited - India
- Thiess Contractors Indonesia
- Gujarat Sidhee Cement - India
- Bukit Makmur.PT - Indonesia
- Eastern Energy - Thailand
- Globalindo Alam Lestari - Indonesia
- Bank of Tokyo Mitsubishi UFJ Ltd
- GAC Shipping (India) Pvt Ltd
- TeaM Sual Corporation - Philippines
- Iligan Light & Power Inc, Philippines
- Metalloyd Limited - United Kingdom
- Tamil Nadu electricity Board
- TNB Fuel Sdn Bhd - Malaysia
- Semirara Mining and Power Corporation, Philippines
- ICICI Bank Limited - India
- Orica Mining Services - Indonesia
- Bangladesh Power Developement Board
- Posco Energy - South Korea
- SN Aboitiz Power Inc, Philippines
- Kumho Petrochemical, South Korea
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Manunggal Multi Energi - Indonesia
- The State Trading Corporation of India Ltd
- PowerSource Philippines DevCo
- Vedanta Resources Plc - India
- Africa Commodities Group - South Africa
- Central Electricity Authority - India
- Interocean Group of Companies - India
- Indian Oil Corporation Limited
- Kalimantan Lumbung Energi - Indonesia
- Parliament of New Zealand
- Meenaskhi Energy Private Limited - India
- VISA Power Limited - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Star Paper Mills Limited - India
- Kapuas Tunggal Persada - Indonesia
- Antam Resourcindo - Indonesia
- Heidelberg Cement - Germany
- Formosa Plastics Group - Taiwan
- Ministry of Mines - Canada
- Binh Thuan Hamico - Vietnam
- Salva Resources Pvt Ltd - India
- Oldendorff Carriers - Singapore
- Commonwealth Bank - Australia
- Indian Energy Exchange, India
- IEA Clean Coal Centre - UK
- Riau Bara Harum - Indonesia
- Ministry of Finance - Indonesia
- Thai Mozambique Logistica
- Kohat Cement Company Ltd. - Pakistan
- Bhoruka Overseas - Indonesia
- Deloitte Consulting - India
- Bukit Asam (Persero) Tbk - Indonesia
- San Jose City I Power Corp, Philippines
- Aditya Birla Group - India
- Vizag Seaport Private Limited - India
- Chamber of Mines of South Africa
- Merrill Lynch Commodities Europe
- Chettinad Cement Corporation Ltd - India
- Kideco Jaya Agung - Indonesia
- Energy Development Corp, Philippines
- Attock Cement Pakistan Limited
- Goldman Sachs - Singapore
- GN Power Mariveles Coal Plant, Philippines
- Economic Council, Georgia
- White Energy Company Limited
- McConnell Dowell - Australia
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