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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 $40,000/day earning bulk carrier to go off hire waiting for bunker supplies), worsening weather conditions, help prevent claims, bundle up several enquiries to achieve volume discounts and even help with bunker planning and suggest the most optimal port or combination of ports to bunker your vessel.
Source: Integr8 Fuels
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Friday, 04 November 22
CHINA EXPANDS COAL TERM CONTRACTS TO ALL MINES TO STABILIZE MARKET - REUTERS
China has expanded long-term thermal coal supply contracts for 2023 to all coal mines and asked power utilities to source more of their demand thro ...
Thursday, 03 November 22
HANDYSIZE VALUES MOVING UP IN OCTOBER, WHILE LNG VALUES SKYROCKET - VESSELSVALUE
Handysize values have increased this month across most ages, following a period of decline. Values for generic 10 year old Handysizes have moved up ...
Thursday, 03 November 22
EUROPEAN GAS SUPPLY SURPLUS, NOVEMBER HBA DOWN TO US$ 308.2 PER TON - ESDM
European gas supply conditions have a major influence in determining fluctuations in the Reference Coal Price (HBA). The November 2022 HBA recorded ...
Wednesday, 02 November 22
MARKET INSIGHT - INTERMODAL
Only five weeks before western sanctions’ full effect, uncertainty over energy has markets and governments on the edge. What was initially th ...
Tuesday, 01 November 22
CHINA COAL TRADE DISRUPTED BY COVID OUTBREAKS AS WINTER LOOMS - REUTERS
China’s strict COVID-19 policy is constraining coal supplies and pushing up prices, industry officials and traders say, just weeks before the ...
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- CNBM International Corporation - China
- Ministry of Finance - Indonesia
- Attock Cement Pakistan Limited
- Uttam Galva Steels Limited - India
- Antam Resourcindo - Indonesia
- Coalindo Energy - Indonesia
- OPG Power Generation Pvt Ltd - India
- Agrawal Coal Company - India
- Latin American Coal - Colombia
- Directorate Of Revenue Intelligence - India
- Binh Thuan Hamico - Vietnam
- Goldman Sachs - Singapore
- Chamber of Mines of South Africa
- Semirara Mining and Power Corporation, Philippines
- Meenaskhi Energy Private Limited - India
- Kideco Jaya Agung - Indonesia
- Trasteel International SA, Italy
- The Treasury - Australian Government
- Straits Asia Resources Limited - Singapore
- Posco Energy - South Korea
- Indian Oil Corporation Limited
- Petrochimia International Co. Ltd.- Taiwan
- Planning Commission, India
- Marubeni Corporation - India
- Simpson Spence & Young - Indonesia
- Bhushan Steel Limited - India
- Wood Mackenzie - Singapore
- Gujarat Mineral Development Corp Ltd - India
- New Zealand Coal & Carbon
- Price Waterhouse Coopers - Russia
- Petron Corporation, Philippines
- Australian Coal Association
- Wilmar Investment Holdings
- Kumho Petrochemical, South Korea
- London Commodity Brokers - England
- Jindal Steel & Power Ltd - India
- AsiaOL BioFuels Corp., Philippines
- Karbindo Abesyapradhi - Indoneisa
- Therma Luzon, Inc, Philippines
- Mintek Dendrill Indonesia
- Parliament of New Zealand
- Timah Investasi Mineral - Indoneisa
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Savvy Resources Ltd - HongKong
- Economic Council, Georgia
- Oldendorff Carriers - Singapore
- Siam City Cement PLC, Thailand
- Holcim Trading Pte Ltd - Singapore
- Sinarmas Energy and Mining - Indonesia
- Gujarat Sidhee Cement - India
- Cigading International Bulk Terminal - Indonesia
- SMG Consultants - Indonesia
- Essar Steel Hazira Ltd - India
- GMR Energy Limited - India
- MS Steel International - UAE
- SN Aboitiz Power Inc, Philippines
- Maheswari Brothers Coal Limited - India
- Sarangani Energy Corporation, Philippines
- Global Coal Blending Company Limited - Australia
- Heidelberg Cement - Germany
- Formosa Plastics Group - Taiwan
- Iligan Light & Power Inc, Philippines
- Makarim & Taira - Indonesia
- Indian Energy Exchange, India
- Ambuja Cements Ltd - India
- Star Paper Mills Limited - India
- Energy Development Corp, Philippines
- LBH Netherlands Bv - Netherlands
- Kobexindo Tractors - Indoneisa
- Sindya Power Generating Company Private Ltd
- Bayan Resources Tbk. - Indonesia
- Baramulti Group, Indonesia
- Commonwealth Bank - Australia
- GVK Power & Infra Limited - India
- Medco Energi Mining Internasional
- SMC Global Power, Philippines
- TNB Fuel Sdn Bhd - Malaysia
- Australian Commodity Traders Exchange
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Interocean Group of Companies - India
- Dalmia Cement Bharat India
- Tata Chemicals Ltd - India
- Ceylon Electricity Board - Sri Lanka
- Kartika Selabumi Mining - Indonesia
- Bangladesh Power Developement Board
- Xindia Steels Limited - India
- Jorong Barutama Greston.PT - Indonesia
- Rashtriya Ispat Nigam Limited - India
- Banpu Public Company Limited - Thailand
- Salva Resources Pvt Ltd - India
- Meralco Power Generation, Philippines
- Metalloyd Limited - United Kingdom
- Bulk Trading Sa - Switzerland
- VISA Power Limited - India
- Edison Trading Spa - Italy
- Aboitiz Power Corporation - Philippines
- Central Java Power - Indonesia
- Kohat Cement Company Ltd. - Pakistan
- Madhucon Powers Ltd - India
- Globalindo Alam Lestari - Indonesia
- Electricity Generating Authority of Thailand
- Miang Besar Coal Terminal - Indonesia
- Bharathi Cement Corporation - India
- Minerals Council of Australia
- Kalimantan Lumbung Energi - Indonesia
- Toyota Tsusho Corporation, Japan
- Grasim Industreis Ltd - India
- Singapore Mercantile Exchange
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Ministry of Mines - Canada
- CIMB Investment Bank - Malaysia
- Ind-Barath Power Infra Limited - India
- India Bulls Power Limited - India
- Vizag Seaport Private Limited - India
- Romanian Commodities Exchange
- Bukit Asam (Persero) Tbk - Indonesia
- International Coal Ventures Pvt Ltd - India
- Karaikal Port Pvt Ltd - India
- Vijayanagar Sugar Pvt Ltd - India
- Kepco SPC Power Corporation, Philippines
- Riau Bara Harum - Indonesia
- Mercator Lines Limited - India
- Semirara Mining Corp, Philippines
- Georgia Ports Authority, United States
- Thiess Contractors Indonesia
- Altura Mining Limited, Indonesia
- Indogreen Group - Indonesia
- Larsen & Toubro Limited - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- GN Power Mariveles Coal Plant, Philippines
- Vedanta Resources Plc - India
- Chettinad Cement Corporation Ltd - India
- European Bulk Services B.V. - Netherlands
- Global Green Power PLC Corporation, Philippines
- Anglo American - United Kingdom
- Bukit Makmur.PT - Indonesia
- Carbofer General Trading SA - India
- Bhatia International Limited - India
- Orica Australia Pty. Ltd.
- Port Waratah Coal Services - Australia
- The University of Queensland
- Maharashtra Electricity Regulatory Commission - India
- Parry Sugars Refinery, India
- Rio Tinto Coal - Australia
- Jaiprakash Power Ventures ltd
- Intertek Mineral Services - Indonesia
- Africa Commodities Group - South Africa
- Electricity Authority, New Zealand
- Neyveli Lignite Corporation Ltd, - India
- PNOC Exploration Corporation - Philippines
- Renaissance Capital - South Africa
- Tamil Nadu electricity Board
- Bahari Cakrawala Sebuku - Indonesia
- Indo Tambangraya Megah - Indonesia
- Cement Manufacturers Association - India
- Malabar Cements Ltd - India
- ICICI Bank Limited - India
- Billiton Holdings Pty Ltd - Australia
- Global Business Power Corporation, Philippines
- Samtan Co., Ltd - South Korea
- Mercuria Energy - Indonesia
- Borneo Indobara - Indonesia
- White Energy Company Limited
- Eastern Energy - Thailand
- Mjunction Services Limited - India
- Eastern Coal Council - USA
- Orica Mining Services - Indonesia
- Sree Jayajothi Cements Limited - India
- Ministry of Transport, Egypt
- Aditya Birla Group - India
- San Jose City I Power Corp, Philippines
- ASAPP Information Group - India
- Krishnapatnam Port Company Ltd. - India
- Sical Logistics Limited - India
- Bukit Baiduri Energy - Indonesia
- Pendopo Energi Batubara - Indonesia
- Manunggal Multi Energi - Indonesia
- Bhoruka Overseas - Indonesia
- Kapuas Tunggal Persada - Indonesia
- Pipit Mutiara Jaya. PT, Indonesia
- PTC India Limited - India
- Standard Chartered Bank - UAE
- Leighton Contractors Pty Ltd - Australia
- Videocon Industries ltd - India
- Deloitte Consulting - India
- Kaltim Prima Coal - Indonesia
- Gujarat Electricity Regulatory Commission - India
- Lanco Infratech Ltd - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- IEA Clean Coal Centre - UK
- The State Trading Corporation of India Ltd
- Coastal Gujarat Power Limited - India
- Barasentosa Lestari - Indonesia
- Energy Link Ltd, New Zealand
- Asmin Koalindo Tuhup - Indonesia
- Coal and Oil Company - UAE
- Central Electricity Authority - India
- Sakthi Sugars Limited - India
- Sojitz Corporation - Japan
- Merrill Lynch Commodities Europe
- PowerSource Philippines DevCo
- PetroVietnam Power Coal Import and Supply Company
- Indika Energy - Indonesia
- Siam City Cement - Thailand
- South Luzon Thermal Energy Corporation
- TeaM Sual Corporation - Philippines
- Thai Mozambique Logistica
- Alfred C Toepfer International GmbH - Germany
- Directorate General of MIneral and Coal - Indonesia
- Bank of Tokyo Mitsubishi UFJ Ltd
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- McConnell Dowell - Australia
- Indonesian Coal Mining Association
- GAC Shipping (India) Pvt Ltd
- IHS Mccloskey Coal Group - USA
- Power Finance Corporation Ltd., India
- Independent Power Producers Association of India
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