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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, 13 December 22
AUSTRALIA TO CAP PRICES OF COAL, GAS TO DRIVE DOWN ENERGY BILLS - REUTERS
Australia will cap coal and gas prices for a year in a bid to shave utility bills for households and businesses hit by soaring costs because of the ...
Tuesday, 13 December 22
YANCOAL AUSTRALIA TO PREPAY $459 MLN DEBT AS RECORD COAL PRICES BOOST CASHFLOWS - REUTERS
Coal miner Yancoal Australia Ltd. said on Friday it intended to prepay $459 million of its debt on or around Dec. 16, as elevated coal prices were ...
Tuesday, 13 December 22
WHY COAL LEADS THE RISE IN COMMODITIES THIS YEAR - MARKETWATCH
This year marked a resurgence for coal, often known — and loathed — by environmentalists as the dirtiest energy source, with prices mor ...
Thursday, 08 December 22
BIMCO TO REVISE WAR RISK CLAUSES
Work to revise the BIMCO War Cancellation Clause 2004, the BIMCO War Risks Clause for Time Chartering 2013 (CONWARTIME 2013) and the BIMCO War Risk ...
Thursday, 08 December 22
COAL ROYALTY PAYMENTS BOOST AUSTRALIAN STATE'S BUDGET FORECAST - REUTERS
Australia’s Queensland state on Wednesday forecast a record surplus for the current financial year, largely driven by higher royalty payments ...
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- Deloitte Consulting - India
- Merrill Lynch Commodities Europe
- Savvy Resources Ltd - HongKong
- Kepco SPC Power Corporation, Philippines
- Rio Tinto Coal - Australia
- Chamber of Mines of South Africa
- Bangladesh Power Developement Board
- Energy Link Ltd, New Zealand
- Global Business Power Corporation, Philippines
- The University of Queensland
- PowerSource Philippines DevCo
- London Commodity Brokers - England
- Price Waterhouse Coopers - Russia
- Attock Cement Pakistan Limited
- Indogreen Group - Indonesia
- Planning Commission, India
- Samtan Co., Ltd - South Korea
- Neyveli Lignite Corporation Ltd, - India
- Electricity Generating Authority of Thailand
- Maharashtra Electricity Regulatory Commission - India
- Parry Sugars Refinery, India
- Latin American Coal - Colombia
- Indonesian Coal Mining Association
- Bhushan Steel Limited - India
- Indika Energy - Indonesia
- Ceylon Electricity Board - Sri Lanka
- Sree Jayajothi Cements Limited - India
- The Treasury - Australian Government
- Therma Luzon, Inc, Philippines
- Star Paper Mills Limited - India
- Mercuria Energy - Indonesia
- Karaikal Port Pvt Ltd - India
- Antam Resourcindo - Indonesia
- Banpu Public Company Limited - Thailand
- Port Waratah Coal Services - Australia
- Bulk Trading Sa - Switzerland
- South Luzon Thermal Energy Corporation
- Thai Mozambique Logistica
- Marubeni Corporation - India
- Manunggal Multi Energi - Indonesia
- Simpson Spence & Young - Indonesia
- Anglo American - United Kingdom
- Ministry of Transport, Egypt
- Jaiprakash Power Ventures ltd
- Orica Australia Pty. Ltd.
- Binh Thuan Hamico - Vietnam
- Coalindo Energy - Indonesia
- OPG Power Generation Pvt Ltd - India
- Holcim Trading Pte Ltd - Singapore
- Toyota Tsusho Corporation, Japan
- Renaissance Capital - South Africa
- Indo Tambangraya Megah - Indonesia
- Kobexindo Tractors - Indoneisa
- Australian Commodity Traders Exchange
- CIMB Investment Bank - Malaysia
- Economic Council, Georgia
- ASAPP Information Group - India
- Mjunction Services Limited - India
- Romanian Commodities Exchange
- TNB Fuel Sdn Bhd - Malaysia
- Makarim & Taira - Indonesia
- Siam City Cement PLC, Thailand
- Heidelberg Cement - Germany
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Jindal Steel & Power Ltd - India
- Krishnapatnam Port Company Ltd. - India
- CNBM International Corporation - China
- Coal and Oil Company - UAE
- Mintek Dendrill Indonesia
- Electricity Authority, New Zealand
- Trasteel International SA, Italy
- Bhatia International Limited - India
- Coastal Gujarat Power Limited - India
- Ambuja Cements Ltd - India
- Parliament of New Zealand
- Africa Commodities Group - South Africa
- McConnell Dowell - Australia
- Gujarat Sidhee Cement - India
- Bharathi Cement Corporation - India
- Riau Bara Harum - Indonesia
- AsiaOL BioFuels Corp., Philippines
- Central Java Power - Indonesia
- Eastern Coal Council - USA
- Commonwealth Bank - Australia
- Semirara Mining Corp, Philippines
- SMC Global Power, Philippines
- Baramulti Group, Indonesia
- Rashtriya Ispat Nigam Limited - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Energy Development Corp, Philippines
- IEA Clean Coal Centre - UK
- Thiess Contractors Indonesia
- Kaltim Prima Coal - Indonesia
- Directorate General of MIneral and Coal - Indonesia
- Global Green Power PLC Corporation, Philippines
- Sinarmas Energy and Mining - Indonesia
- Indian Energy Exchange, India
- Kalimantan Lumbung Energi - Indonesia
- Billiton Holdings Pty Ltd - Australia
- Malabar Cements Ltd - India
- Essar Steel Hazira Ltd - India
- Agrawal Coal Company - India
- TeaM Sual Corporation - Philippines
- Singapore Mercantile Exchange
- Kideco Jaya Agung - Indonesia
- European Bulk Services B.V. - Netherlands
- Vizag Seaport Private Limited - India
- Formosa Plastics Group - Taiwan
- Bukit Makmur.PT - Indonesia
- Pendopo Energi Batubara - Indonesia
- Australian Coal Association
- Minerals Council of Australia
- Gujarat Electricity Regulatory Commission - India
- Mercator Lines Limited - India
- White Energy Company Limited
- Wilmar Investment Holdings
- GMR Energy Limited - India
- Salva Resources Pvt Ltd - India
- San Jose City I Power Corp, Philippines
- PNOC Exploration Corporation - Philippines
- Orica Mining Services - Indonesia
- Petrochimia International Co. Ltd.- Taiwan
- Standard Chartered Bank - UAE
- Eastern Energy - Thailand
- Cigading International Bulk Terminal - Indonesia
- Bhoruka Overseas - Indonesia
- Cement Manufacturers Association - India
- Directorate Of Revenue Intelligence - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Oldendorff Carriers - Singapore
- Meenaskhi Energy Private Limited - India
- Maheswari Brothers Coal Limited - India
- Sakthi Sugars Limited - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Meralco Power Generation, Philippines
- Videocon Industries ltd - India
- Bukit Baiduri Energy - Indonesia
- Karbindo Abesyapradhi - Indoneisa
- Miang Besar Coal Terminal - Indonesia
- Sarangani Energy Corporation, Philippines
- Lanco Infratech Ltd - India
- Kapuas Tunggal Persada - Indonesia
- Kohat Cement Company Ltd. - Pakistan
- Bukit Asam (Persero) Tbk - Indonesia
- Timah Investasi Mineral - Indoneisa
- Tamil Nadu electricity Board
- Kumho Petrochemical, South Korea
- Semirara Mining and Power Corporation, Philippines
- SMG Consultants - Indonesia
- Interocean Group of Companies - India
- Jorong Barutama Greston.PT - Indonesia
- Asmin Koalindo Tuhup - Indonesia
- Madhucon Powers Ltd - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Uttam Galva Steels Limited - India
- Ind-Barath Power Infra Limited - India
- India Bulls Power Limited - India
- Posco Energy - South Korea
- Xindia Steels Limited - India
- Indian Oil Corporation Limited
- MS Steel International - UAE
- Grasim Industreis Ltd - India
- Aditya Birla Group - India
- Sical Logistics Limited - India
- The State Trading Corporation of India Ltd
- Altura Mining Limited, Indonesia
- Vedanta Resources Plc - India
- Global Coal Blending Company Limited - Australia
- Leighton Contractors Pty Ltd - Australia
- International Coal Ventures Pvt Ltd - India
- Globalindo Alam Lestari - Indonesia
- Sindya Power Generating Company Private Ltd
- Vijayanagar Sugar Pvt Ltd - India
- PTC India Limited - India
- GVK Power & Infra Limited - India
- Petron Corporation, Philippines
- Georgia Ports Authority, United States
- Kartika Selabumi Mining - Indonesia
- SN Aboitiz Power Inc, Philippines
- Iligan Light & Power Inc, Philippines
- Straits Asia Resources Limited - Singapore
- Power Finance Corporation Ltd., India
- Medco Energi Mining Internasional
- Siam City Cement - Thailand
- Alfred C Toepfer International GmbH - Germany
- Bank of Tokyo Mitsubishi UFJ Ltd
- Wood Mackenzie - Singapore
- Barasentosa Lestari - Indonesia
- Tata Chemicals Ltd - India
- VISA Power Limited - India
- ICICI Bank Limited - India
- Metalloyd Limited - United Kingdom
- GAC Shipping (India) Pvt Ltd
- Edison Trading Spa - Italy
- Bayan Resources Tbk. - Indonesia
- Carbofer General Trading SA - India
- Intertek Mineral Services - Indonesia
- Gujarat Mineral Development Corp Ltd - India
- Chettinad Cement Corporation Ltd - India
- Independent Power Producers Association of India
- Pipit Mutiara Jaya. PT, Indonesia
- Goldman Sachs - Singapore
- Sojitz Corporation - Japan
- LBH Netherlands Bv - Netherlands
- GN Power Mariveles Coal Plant, Philippines
- New Zealand Coal & Carbon
- Aboitiz Power Corporation - Philippines
- Ministry of Mines - Canada
- Dalmia Cement Bharat India
- Ministry of Finance - Indonesia
- Bahari Cakrawala Sebuku - Indonesia
- Borneo Indobara - Indonesia
- IHS Mccloskey Coal Group - USA
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Larsen & Toubro Limited - India
- Central Electricity Authority - India
- PetroVietnam Power Coal Import and Supply Company
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