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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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Friday, 18 November 22
REALITIES OF LOI LIABILITIES - BALTIC EXCHANGE
KNOWLEDGE TO ELEVATE
The cargo misdelivery claim in Trafigura Maritime Logistics Pte Ltd v. Clearlake Shipping Pte Ltd (Miracle Hope) [2022] E ...
Tuesday, 15 November 22
CHINA SEES RISING COAL STORAGE AMID SUPPLY PUSH - XINHUA
Coal stockpiles at China’s power plants have seen considerable increases, ensuring energy supply for the winter, the country’s energy r ...
Tuesday, 15 November 22
SEABORNE THERMAL COAL PRICES START TO EASE, BUT PROCESS IS UNEVEN - REUTERS
Prices for seaborne thermal coal have started to drop as fears of a winter energy crunch ease, but the rate of decline has varied across the differ ...
Thursday, 10 November 22
INDIA: THERMAL PLANTS HAVE ADEQUATE COAL STOCKS AT 25.6 MILLION TONNES, SAYS GOVT - IANS
The coal stock with domestic dry fuel-based power plants, as on October 31, was 25.6 million tonnes, the government said, adding that the availabil ...
Tuesday, 08 November 22
OUTLOOK ON CHINA’S WEAKENED BASIC MATERIALS SECTOR CLOUDED BY POLICY SWINGS - FITCH RATINGS
Fitch Ratings expects basic materials demand in China to improve qoq in 4Q22, driven by seasonally higher construction activity, solid infrastructu ...
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- Ambuja Cements Ltd - India
- The Treasury - Australian Government
- Wood Mackenzie - Singapore
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- Barasentosa Lestari - Indonesia
- Krishnapatnam Port Company Ltd. - India
- Anglo American - United Kingdom
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- Commonwealth Bank - Australia
- Indonesian Coal Mining Association
- CNBM International Corporation - China
- Banpu Public Company Limited - Thailand
- Electricity Generating Authority of Thailand
- Grasim Industreis Ltd - India
- MS Steel International - UAE
- Videocon Industries ltd - India
- Meenaskhi Energy Private Limited - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- Coal and Oil Company - UAE
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- Mjunction Services Limited - India
- International Coal Ventures Pvt Ltd - India
- Kaltim Prima Coal - Indonesia
- Interocean Group of Companies - India
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- Economic Council, Georgia
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- Georgia Ports Authority, United States
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- Australian Commodity Traders Exchange
- Bhushan Steel Limited - India
- Mercator Lines Limited - India
- Globalindo Alam Lestari - Indonesia
- Uttam Galva Steels Limited - India
- Coalindo Energy - Indonesia
- Dalmia Cement Bharat India
- Vizag Seaport Private Limited - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
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- Planning Commission, India
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- Pipit Mutiara Jaya. PT, Indonesia
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- Central Electricity Authority - India
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- McConnell Dowell - Australia
- Chettinad Cement Corporation Ltd - India
- Renaissance Capital - South Africa
- Baramulti Group, Indonesia
- Trasteel International SA, Italy
- Parry Sugars Refinery, India
- Directorate General of MIneral and Coal - Indonesia
- Rashtriya Ispat Nigam Limited - India
- Riau Bara Harum - Indonesia
- Kepco SPC Power Corporation, Philippines
- Petron Corporation, Philippines
- Ministry of Mines - Canada
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Posco Energy - South Korea
- Larsen & Toubro Limited - India
- Singapore Mercantile Exchange
- Indika Energy - Indonesia
- Karbindo Abesyapradhi - Indoneisa
- CIMB Investment Bank - Malaysia
- Aditya Birla Group - India
- Kapuas Tunggal Persada - Indonesia
- Offshore Bulk Terminal Pte Ltd, Singapore
- Maharashtra Electricity Regulatory Commission - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- White Energy Company Limited
- Orica Mining Services - Indonesia
- Mercuria Energy - Indonesia
- Thai Mozambique Logistica
- Jorong Barutama Greston.PT - Indonesia
- PTC India Limited - India
- Aboitiz Power Corporation - Philippines
- Merrill Lynch Commodities Europe
- Sinarmas Energy and Mining - Indonesia
- IEA Clean Coal Centre - UK
- ICICI Bank Limited - India
- Salva Resources Pvt Ltd - India
- Semirara Mining Corp, Philippines
- Siam City Cement PLC, Thailand
- Bangladesh Power Developement Board
- Mintek Dendrill Indonesia
- Cigading International Bulk Terminal - Indonesia
- Meralco Power Generation, Philippines
- Price Waterhouse Coopers - Russia
- Semirara Mining and Power Corporation, Philippines
- Savvy Resources Ltd - HongKong
- South Luzon Thermal Energy Corporation
- Ind-Barath Power Infra Limited - India
- Bhatia International Limited - India
- Karaikal Port Pvt Ltd - India
- Makarim & Taira - Indonesia
- Oldendorff Carriers - Singapore
- Tata Chemicals Ltd - India
- Jindal Steel & Power Ltd - India
- Indo Tambangraya Megah - Indonesia
- Jaiprakash Power Ventures ltd
- India Bulls Power Limited - India
- Orica Australia Pty. Ltd.
- Kideco Jaya Agung - Indonesia
- Thiess Contractors Indonesia
- SN Aboitiz Power Inc, Philippines
- Agrawal Coal Company - India
- Wilmar Investment Holdings
- Minerals Council of Australia
- Alfred C Toepfer International GmbH - Germany
- PetroVietnam Power Coal Import and Supply Company
- Kohat Cement Company Ltd. - Pakistan
- Cement Manufacturers Association - India
- The University of Queensland
- Star Paper Mills Limited - India
- Asmin Koalindo Tuhup - Indonesia
- Attock Cement Pakistan Limited
- Electricity Authority, New Zealand
- Essar Steel Hazira Ltd - India
- IHS Mccloskey Coal Group - USA
- Energy Development Corp, Philippines
- Samtan Co., Ltd - South Korea
- Siam City Cement - Thailand
- Indogreen Group - Indonesia
- Altura Mining Limited, Indonesia
- Gujarat Mineral Development Corp Ltd - India
- Iligan Light & Power Inc, Philippines
- Formosa Plastics Group - Taiwan
- Goldman Sachs - Singapore
- PowerSource Philippines DevCo
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Global Coal Blending Company Limited - Australia
- GAC Shipping (India) Pvt Ltd
- Sarangani Energy Corporation, Philippines
- Coastal Gujarat Power Limited - India
- Billiton Holdings Pty Ltd - Australia
- Rio Tinto Coal - Australia
- Sojitz Corporation - Japan
- Binh Thuan Hamico - Vietnam
- San Jose City I Power Corp, Philippines
- VISA Power Limited - India
- TNB Fuel Sdn Bhd - Malaysia
- Bukit Asam (Persero) Tbk - Indonesia
- TeaM Sual Corporation - Philippines
- Vijayanagar Sugar Pvt Ltd - India
- Heidelberg Cement - Germany
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Kumho Petrochemical, South Korea
- Kalimantan Lumbung Energi - Indonesia
- Pendopo Energi Batubara - Indonesia
- PNOC Exploration Corporation - Philippines
- Australian Coal Association
- AsiaOL BioFuels Corp., Philippines
- Intertek Mineral Services - Indonesia
- Chamber of Mines of South Africa
- ASAPP Information Group - India
- Indian Energy Exchange, India
- Gujarat Sidhee Cement - India
- Ministry of Transport, Egypt
- Energy Link Ltd, New Zealand
- GN Power Mariveles Coal Plant, Philippines
- European Bulk Services B.V. - Netherlands
- Bharathi Cement Corporation - India
- Bukit Makmur.PT - Indonesia
- Sree Jayajothi Cements Limited - India
- Carbofer General Trading SA - India
- Lanco Infratech Ltd - India
- Latin American Coal - Colombia
- SMG Consultants - Indonesia
- Medco Energi Mining Internasional
- Holcim Trading Pte Ltd - Singapore
- Parliament of New Zealand
- Ceylon Electricity Board - Sri Lanka
- Bulk Trading Sa - Switzerland
- Global Business Power Corporation, Philippines
- Edison Trading Spa - Italy
- Neyveli Lignite Corporation Ltd, - India
- Miang Besar Coal Terminal - Indonesia
- Tamil Nadu electricity Board
- Bhoruka Overseas - Indonesia
- SMC Global Power, Philippines
- Ministry of Finance - Indonesia
- Bayan Resources Tbk. - Indonesia
- Africa Commodities Group - South Africa
- Sindya Power Generating Company Private Ltd
- Standard Chartered Bank - UAE
- Toyota Tsusho Corporation, Japan
- Directorate Of Revenue Intelligence - India
- Vedanta Resources Plc - India
- Port Waratah Coal Services - Australia
- Therma Luzon, Inc, Philippines
- Petrochimia International Co. Ltd.- Taiwan
- Malabar Cements Ltd - India
- Power Finance Corporation Ltd., India
- Sical Logistics Limited - India
- Global Green Power PLC Corporation, Philippines
- Sakthi Sugars Limited - India
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