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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, 29 July 22
GLENCORE TO SUPPLY COAL TO NIPPON STEEL AT $375 PER TON - BLOOMBERG
Glencore Plc, agreed to supply coal to Nippon Steel at one of the highest prices ever paid by the Japan Bloomberg reported on July 27.
...
Friday, 29 July 22
GLOBAL COAL DEMAND IS SET TO RETURN TO ITS ALL-TIME HIGH IN 2022 - IEA
The world’s consumption of coal is set to rise slightly in 2022, taking it back to the record level it reached nearly a decade ago, according ...
Thursday, 28 July 22
CREW FAMILIARISATION IS CRITICAL WHEN TAKING OVER A VESSEL - WEST P&I CLUB
Knowledge to Elevate
When a vessel changes ownership and/or manager, it can take some considerable time before the new crew and mana ...
Thursday, 28 July 22
RETURN OF COAL A THREAT TO EUROPEAN COMPANIES' ESG RATINGS - REUTERS
European companies turning to coal as an alternative to Russian gas face a hit to their environmental, social and governance ratings, leaving them ...
Wednesday, 27 July 22
MARKET INSIGHT - INTERMODAL
Amid the upcoming ban on Russian coal from the EU, which will be in full effect on August 10th, EU nations have been accelerating their coal import ...
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- Global Coal Blending Company Limited - Australia
- Trasteel International SA, Italy
- Bhushan Steel Limited - India
- Indonesian Coal Mining Association
- Gujarat Sidhee Cement - India
- Energy Development Corp, Philippines
- Gujarat Mineral Development Corp Ltd - India
- Wilmar Investment Holdings
- Krishnapatnam Port Company Ltd. - India
- Grasim Industreis Ltd - India
- Uttam Galva Steels Limited - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- McConnell Dowell - Australia
- The Treasury - Australian Government
- Indogreen Group - Indonesia
- Karbindo Abesyapradhi - Indoneisa
- Sojitz Corporation - Japan
- Price Waterhouse Coopers - Russia
- Petron Corporation, Philippines
- Ind-Barath Power Infra Limited - India
- Sinarmas Energy and Mining - Indonesia
- ASAPP Information Group - India
- Borneo Indobara - Indonesia
- Samtan Co., Ltd - South Korea
- Malabar Cements Ltd - India
- Dalmia Cement Bharat India
- Kohat Cement Company Ltd. - Pakistan
- Jaiprakash Power Ventures ltd
- Aditya Birla Group - India
- Sical Logistics Limited - India
- Singapore Mercantile Exchange
- Medco Energi Mining Internasional
- SN Aboitiz Power Inc, Philippines
- CIMB Investment Bank - Malaysia
- Barasentosa Lestari - Indonesia
- Meenaskhi Energy Private Limited - India
- San Jose City I Power Corp, Philippines
- Ministry of Mines - Canada
- Semirara Mining and Power Corporation, Philippines
- Orica Mining Services - Indonesia
- South Luzon Thermal Energy Corporation
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- LBH Netherlands Bv - Netherlands
- Mintek Dendrill Indonesia
- White Energy Company Limited
- Larsen & Toubro Limited - India
- GVK Power & Infra Limited - India
- Antam Resourcindo - Indonesia
- Kepco SPC Power Corporation, Philippines
- Energy Link Ltd, New Zealand
- Australian Coal Association
- Pipit Mutiara Jaya. PT, Indonesia
- Bangladesh Power Developement Board
- Georgia Ports Authority, United States
- Port Waratah Coal Services - Australia
- Agrawal Coal Company - India
- Bukit Makmur.PT - Indonesia
- Semirara Mining Corp, Philippines
- London Commodity Brokers - England
- Eastern Energy - Thailand
- Australian Commodity Traders Exchange
- Siam City Cement - Thailand
- Sindya Power Generating Company Private Ltd
- Posco Energy - South Korea
- Bukit Baiduri Energy - Indonesia
- Global Business Power Corporation, Philippines
- Minerals Council of Australia
- Kapuas Tunggal Persada - Indonesia
- Essar Steel Hazira Ltd - India
- Rio Tinto Coal - Australia
- Maheswari Brothers Coal Limited - India
- Indian Oil Corporation Limited
- Sree Jayajothi Cements Limited - India
- Vijayanagar Sugar Pvt Ltd - India
- Jorong Barutama Greston.PT - Indonesia
- Lanco Infratech Ltd - India
- PetroVietnam Power Coal Import and Supply Company
- Mercuria Energy - Indonesia
- Asmin Koalindo Tuhup - Indonesia
- GMR Energy Limited - India
- Wood Mackenzie - Singapore
- Ceylon Electricity Board - Sri Lanka
- Bulk Trading Sa - Switzerland
- Banpu Public Company Limited - Thailand
- Coastal Gujarat Power Limited - India
- Vizag Seaport Private Limited - India
- Bhoruka Overseas - Indonesia
- Toyota Tsusho Corporation, Japan
- Chettinad Cement Corporation Ltd - India
- Leighton Contractors Pty Ltd - Australia
- Metalloyd Limited - United Kingdom
- Economic Council, Georgia
- TNB Fuel Sdn Bhd - Malaysia
- Bank of Tokyo Mitsubishi UFJ Ltd
- New Zealand Coal & Carbon
- Videocon Industries ltd - India
- Goldman Sachs - Singapore
- Coalindo Energy - Indonesia
- Kartika Selabumi Mining - Indonesia
- MS Steel International - UAE
- Savvy Resources Ltd - HongKong
- Independent Power Producers Association of India
- Central Java Power - Indonesia
- Cigading International Bulk Terminal - Indonesia
- Parry Sugars Refinery, India
- Renaissance Capital - South Africa
- Electricity Authority, New Zealand
- Marubeni Corporation - India
- AsiaOL BioFuels Corp., Philippines
- Directorate General of MIneral and Coal - Indonesia
- Planning Commission, India
- Kideco Jaya Agung - Indonesia
- Ministry of Transport, Egypt
- The University of Queensland
- IEA Clean Coal Centre - UK
- IHS Mccloskey Coal Group - USA
- OPG Power Generation Pvt Ltd - India
- Maharashtra Electricity Regulatory Commission - India
- Africa Commodities Group - South Africa
- GN Power Mariveles Coal Plant, Philippines
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Tata Chemicals Ltd - India
- Indo Tambangraya Megah - Indonesia
- Miang Besar Coal Terminal - Indonesia
- Manunggal Multi Energi - Indonesia
- Timah Investasi Mineral - Indoneisa
- Petrochimia International Co. Ltd.- Taiwan
- Standard Chartered Bank - UAE
- Kalimantan Lumbung Energi - Indonesia
- Meralco Power Generation, Philippines
- PowerSource Philippines DevCo
- CNBM International Corporation - China
- PTC India Limited - India
- Thai Mozambique Logistica
- Altura Mining Limited, Indonesia
- Cement Manufacturers Association - India
- Iligan Light & Power Inc, Philippines
- Billiton Holdings Pty Ltd - Australia
- European Bulk Services B.V. - Netherlands
- Central Electricity Authority - India
- Formosa Plastics Group - Taiwan
- Power Finance Corporation Ltd., India
- Commonwealth Bank - Australia
- Bukit Asam (Persero) Tbk - Indonesia
- Global Green Power PLC Corporation, Philippines
- Merrill Lynch Commodities Europe
- SMC Global Power, Philippines
- Star Paper Mills Limited - India
- Vedanta Resources Plc - India
- Jindal Steel & Power Ltd - India
- Ambuja Cements Ltd - India
- Heidelberg Cement - Germany
- Riau Bara Harum - Indonesia
- Madhucon Powers Ltd - India
- Pendopo Energi Batubara - Indonesia
- Salva Resources Pvt Ltd - India
- PNOC Exploration Corporation - Philippines
- Latin American Coal - Colombia
- Sakthi Sugars Limited - India
- Interocean Group of Companies - India
- Intertek Mineral Services - Indonesia
- Offshore Bulk Terminal Pte Ltd, Singapore
- ICICI Bank Limited - India
- Bharathi Cement Corporation - India
- Directorate Of Revenue Intelligence - India
- Rashtriya Ispat Nigam Limited - India
- Romanian Commodities Exchange
- Neyveli Lignite Corporation Ltd, - India
- Makarim & Taira - Indonesia
- Parliament of New Zealand
- Carbofer General Trading SA - India
- Kaltim Prima Coal - Indonesia
- International Coal Ventures Pvt Ltd - India
- Binh Thuan Hamico - Vietnam
- Straits Asia Resources Limited - Singapore
- Bayan Resources Tbk. - Indonesia
- Bahari Cakrawala Sebuku - Indonesia
- Eastern Coal Council - USA
- Indian Energy Exchange, India
- Thiess Contractors Indonesia
- GAC Shipping (India) Pvt Ltd
- TeaM Sual Corporation - Philippines
- Attock Cement Pakistan Limited
- Coal and Oil Company - UAE
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Xindia Steels Limited - India
- Chamber of Mines of South Africa
- Alfred C Toepfer International GmbH - Germany
- Sarangani Energy Corporation, Philippines
- Tamil Nadu electricity Board
- Simpson Spence & Young - Indonesia
- The State Trading Corporation of India Ltd
- Kobexindo Tractors - Indoneisa
- Aboitiz Power Corporation - Philippines
- Edison Trading Spa - Italy
- Oldendorff Carriers - Singapore
- Kumho Petrochemical, South Korea
- India Bulls Power Limited - India
- Mjunction Services Limited - India
- Holcim Trading Pte Ltd - Singapore
- Therma Luzon, Inc, Philippines
- VISA Power Limited - India
- Anglo American - United Kingdom
- Electricity Generating Authority of Thailand
- Ministry of Finance - Indonesia
- SMG Consultants - Indonesia
- Indika Energy - Indonesia
- Bhatia International Limited - India
- Gujarat Electricity Regulatory Commission - India
- Baramulti Group, Indonesia
- Mercator Lines Limited - India
- Orica Australia Pty. Ltd.
- Globalindo Alam Lestari - Indonesia
- Siam City Cement PLC, Thailand
- Karaikal Port Pvt Ltd - India
- Deloitte Consulting - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
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