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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, 26 July 22
CAP RUSSIA'S OIL PRICE NOW - PROJECT SYNDICATE
Though the price of oil has declined in recent weeks, it is still through the roof, filtering through to gasoline prices, and causing economic and ...
Tuesday, 26 July 22
WILL SOUTH AMERICA’S WINTER DEMAND DRAW LNG CARGOES AWAY FROM EUROPE? - ICIS
South America is now in the middle of its winter demand season. Last year the region increased its share of global LNG imports in winter, with Braz ...
Monday, 25 July 22
GLOBAL 2021 COAL-FIRED ELECTRICITY GENERATION SURGES TO RECORD HIGH - REUTERS
By contrast, mine output was still fractionally below the record set between 2012 and 2014 because older and less efficient coal generators have be ...
Saturday, 23 July 22
THE EU HAS BEEN REDUCING IMPORTS OF RUSSIAN REFINED OIL PRODUCTS SINCE MARCH - BANCHERO COSTA
The European Union could now ban the import and transit of fuel oil from Russia around six months ahead of the planned deadline, an EU official and ...
Saturday, 23 July 22
INDONESIA CONSIDERING SCRAPPING DOMESTIC SALES RULE FOR PALM OIL EXPORTS - REUTERS
Indonesia is considering removing a domestic sales requirement for palm oil exports because high inventories of the vegetable oil have been holding ...
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- Krishnapatnam Port Company Ltd. - India
- Merrill Lynch Commodities Europe
- Indonesian Coal Mining Association
- Kaltim Prima Coal - Indonesia
- IEA Clean Coal Centre - UK
- Vijayanagar Sugar Pvt Ltd - India
- Central Electricity Authority - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Meenaskhi Energy Private Limited - India
- Wilmar Investment Holdings
- Power Finance Corporation Ltd., India
- Agrawal Coal Company - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Thai Mozambique Logistica
- Ind-Barath Power Infra Limited - India
- Sojitz Corporation - Japan
- Mjunction Services Limited - India
- Parliament of New Zealand
- GAC Shipping (India) Pvt Ltd
- GN Power Mariveles Coal Plant, Philippines
- Orica Australia Pty. Ltd.
- Antam Resourcindo - Indonesia
- Salva Resources Pvt Ltd - India
- Parry Sugars Refinery, India
- Mintek Dendrill Indonesia
- Economic Council, Georgia
- Siam City Cement - Thailand
- Renaissance Capital - South Africa
- Kalimantan Lumbung Energi - Indonesia
- PNOC Exploration Corporation - Philippines
- Marubeni Corporation - India
- Siam City Cement PLC, Thailand
- New Zealand Coal & Carbon
- Bhatia International Limited - India
- London Commodity Brokers - England
- Planning Commission, India
- Xindia Steels Limited - India
- Globalindo Alam Lestari - Indonesia
- India Bulls Power Limited - India
- Coalindo Energy - Indonesia
- Chettinad Cement Corporation Ltd - India
- Maharashtra Electricity Regulatory Commission - India
- Alfred C Toepfer International GmbH - Germany
- Oldendorff Carriers - Singapore
- Semirara Mining and Power Corporation, Philippines
- Barasentosa Lestari - Indonesia
- Commonwealth Bank - Australia
- Sical Logistics Limited - India
- Bukit Baiduri Energy - Indonesia
- Port Waratah Coal Services - Australia
- European Bulk Services B.V. - Netherlands
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- TNB Fuel Sdn Bhd - Malaysia
- Aboitiz Power Corporation - Philippines
- Chamber of Mines of South Africa
- Anglo American - United Kingdom
- Intertek Mineral Services - Indonesia
- Petron Corporation, Philippines
- Jaiprakash Power Ventures ltd
- Kartika Selabumi Mining - Indonesia
- Gujarat Mineral Development Corp Ltd - India
- Madhucon Powers Ltd - India
- Bukit Makmur.PT - Indonesia
- Metalloyd Limited - United Kingdom
- SMG Consultants - Indonesia
- Toyota Tsusho Corporation, Japan
- Tata Chemicals Ltd - India
- Bharathi Cement Corporation - India
- Pendopo Energi Batubara - Indonesia
- Central Java Power - Indonesia
- Neyveli Lignite Corporation Ltd, - India
- GMR Energy Limited - India
- Bahari Cakrawala Sebuku - Indonesia
- Sarangani Energy Corporation, Philippines
- Borneo Indobara - Indonesia
- CIMB Investment Bank - Malaysia
- PetroVietnam Power Coal Import and Supply Company
- Larsen & Toubro Limited - India
- Medco Energi Mining Internasional
- Rashtriya Ispat Nigam Limited - India
- Trasteel International SA, Italy
- Global Green Power PLC Corporation, Philippines
- Bank of Tokyo Mitsubishi UFJ Ltd
- Uttam Galva Steels Limited - India
- Ceylon Electricity Board - Sri Lanka
- Semirara Mining Corp, Philippines
- IHS Mccloskey Coal Group - USA
- Orica Mining Services - Indonesia
- Kumho Petrochemical, South Korea
- Tamil Nadu electricity Board
- Australian Commodity Traders Exchange
- South Luzon Thermal Energy Corporation
- Standard Chartered Bank - UAE
- ICICI Bank Limited - India
- Cement Manufacturers Association - India
- Manunggal Multi Energi - Indonesia
- Sindya Power Generating Company Private Ltd
- Sinarmas Energy and Mining - Indonesia
- Goldman Sachs - Singapore
- Banpu Public Company Limited - Thailand
- Formosa Plastics Group - Taiwan
- Heidelberg Cement - Germany
- Bulk Trading Sa - Switzerland
- Bhushan Steel Limited - India
- Ministry of Mines - Canada
- Savvy Resources Ltd - HongKong
- Billiton Holdings Pty Ltd - Australia
- Iligan Light & Power Inc, Philippines
- Ambuja Cements Ltd - India
- McConnell Dowell - Australia
- Kepco SPC Power Corporation, Philippines
- PowerSource Philippines DevCo
- Vizag Seaport Private Limited - India
- PTC India Limited - India
- CNBM International Corporation - China
- Carbofer General Trading SA - India
- SMC Global Power, Philippines
- Jindal Steel & Power Ltd - India
- Australian Coal Association
- SN Aboitiz Power Inc, Philippines
- Bangladesh Power Developement Board
- Indian Energy Exchange, India
- Indian Oil Corporation Limited
- Directorate Of Revenue Intelligence - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Petrochimia International Co. Ltd.- Taiwan
- Cigading International Bulk Terminal - Indonesia
- Meralco Power Generation, Philippines
- Africa Commodities Group - South Africa
- Binh Thuan Hamico - Vietnam
- Altura Mining Limited, Indonesia
- Eastern Energy - Thailand
- TeaM Sual Corporation - Philippines
- Aditya Birla Group - India
- Karaikal Port Pvt Ltd - India
- Kideco Jaya Agung - Indonesia
- Energy Development Corp, Philippines
- Lanco Infratech Ltd - India
- Asmin Koalindo Tuhup - Indonesia
- Gujarat Sidhee Cement - India
- VISA Power Limited - India
- Eastern Coal Council - USA
- Holcim Trading Pte Ltd - Singapore
- Leighton Contractors Pty Ltd - Australia
- Romanian Commodities Exchange
- Energy Link Ltd, New Zealand
- Independent Power Producers Association of India
- Rio Tinto Coal - Australia
- Ministry of Transport, Egypt
- The University of Queensland
- Offshore Bulk Terminal Pte Ltd, Singapore
- Malabar Cements Ltd - India
- Electricity Generating Authority of Thailand
- Posco Energy - South Korea
- OPG Power Generation Pvt Ltd - India
- LBH Netherlands Bv - Netherlands
- The State Trading Corporation of India Ltd
- Kapuas Tunggal Persada - Indonesia
- Essar Steel Hazira Ltd - India
- Singapore Mercantile Exchange
- Miang Besar Coal Terminal - Indonesia
- White Energy Company Limited
- Bayan Resources Tbk. - Indonesia
- AsiaOL BioFuels Corp., Philippines
- Therma Luzon, Inc, Philippines
- Global Coal Blending Company Limited - Australia
- Kohat Cement Company Ltd. - Pakistan
- Bhoruka Overseas - Indonesia
- Mercuria Energy - Indonesia
- Wood Mackenzie - Singapore
- Interocean Group of Companies - India
- Dalmia Cement Bharat India
- The Treasury - Australian Government
- Simpson Spence & Young - Indonesia
- Baramulti Group, Indonesia
- Star Paper Mills Limited - India
- Coal and Oil Company - UAE
- Global Business Power Corporation, Philippines
- Riau Bara Harum - Indonesia
- Indo Tambangraya Megah - Indonesia
- Latin American Coal - Colombia
- Indika Energy - Indonesia
- Straits Asia Resources Limited - Singapore
- Karbindo Abesyapradhi - Indoneisa
- Minerals Council of Australia
- Pipit Mutiara Jaya. PT, Indonesia
- Thiess Contractors Indonesia
- Coastal Gujarat Power Limited - India
- Deloitte Consulting - India
- Electricity Authority, New Zealand
- ASAPP Information Group - India
- Indogreen Group - Indonesia
- Samtan Co., Ltd - South Korea
- Price Waterhouse Coopers - Russia
- Attock Cement Pakistan Limited
- MS Steel International - UAE
- Gujarat Electricity Regulatory Commission - India
- Jorong Barutama Greston.PT - Indonesia
- International Coal Ventures Pvt Ltd - India
- Georgia Ports Authority, United States
- Sree Jayajothi Cements Limited - India
- Grasim Industreis Ltd - India
- Bukit Asam (Persero) Tbk - Indonesia
- Kobexindo Tractors - Indoneisa
- Videocon Industries ltd - India
- Makarim & Taira - Indonesia
- Timah Investasi Mineral - Indoneisa
- Sakthi Sugars Limited - India
- Mercator Lines Limited - India
- GVK Power & Infra Limited - India
- Directorate General of MIneral and Coal - Indonesia
- Edison Trading Spa - Italy
- Ministry of Finance - Indonesia
- San Jose City I Power Corp, Philippines
- Vedanta Resources Plc - India
- Maheswari Brothers Coal Limited - India
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