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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, 19 July 22
DRY BULK MARKET: CAPESIZE MARKET FIRMS THIS WEEK - BALTIC EXCHANGE
Capesize
Firmer sentiment across both basins pushed the Capesize 5TC route average above the $20,000 threshold this week, closing at $24,209. A ...
Tuesday, 19 July 22
WHY SHIPPING MIGHT BE ABOUT TO GET A LITTLE BIT SLOWER - WORLD ECONOMIC FORUM
If shipping is the beating heart of global trade, its pulse is about to get slower.
Faced with uncertainty about which fuels to use in the long ...
Tuesday, 19 July 22
GERMANY'S INCREASED COAL, OIL USE WILL BE TEMPORARY, SCHOLZ SAYS - CNBC
Chancellor Olaf Scholz says Germany’s decision to reactivate coal and oil-fired power plants to relieve energy shortages because of the war i ...
Tuesday, 19 July 22
INDONESIA REMOVES PALM OIL EXPORT LEVY UNTIL AUG. 31 - REUTERS
Indonesia has scrapped its export levy for all palm oil products until Aug. 31 in a fresh attempt to boost exports and ease high inventories, finan ...
Tuesday, 19 July 22
CHINA'S JUNE DAILY COAL OUTPUT JUMPS ON PEAK SUMMER DEMAND - REUTERS
China’s daily coal output in June rose 6.6 per cent from a month earlier as miners cranked up output ahead of peak summer temperatures, when ...
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- SMG Consultants - Indonesia
- Merrill Lynch Commodities Europe
- Posco Energy - South Korea
- Mercuria Energy - Indonesia
- Grasim Industreis Ltd - India
- Price Waterhouse Coopers - Russia
- Petrochimia International Co. Ltd.- Taiwan
- The State Trading Corporation of India Ltd
- Australian Coal Association
- Electricity Generating Authority of Thailand
- Straits Asia Resources Limited - Singapore
- Pipit Mutiara Jaya. PT, Indonesia
- Thiess Contractors Indonesia
- AsiaOL BioFuels Corp., Philippines
- Africa Commodities Group - South Africa
- Global Coal Blending Company Limited - Australia
- India Bulls Power Limited - India
- CIMB Investment Bank - Malaysia
- Global Green Power PLC Corporation, Philippines
- Kaltim Prima Coal - Indonesia
- Toyota Tsusho Corporation, Japan
- Latin American Coal - Colombia
- Globalindo Alam Lestari - Indonesia
- South Luzon Thermal Energy Corporation
- Salva Resources Pvt Ltd - India
- Malabar Cements Ltd - India
- Videocon Industries ltd - India
- Bahari Cakrawala Sebuku - Indonesia
- Bukit Makmur.PT - Indonesia
- Orica Australia Pty. Ltd.
- Iligan Light & Power Inc, Philippines
- Minerals Council of Australia
- Timah Investasi Mineral - Indoneisa
- Wilmar Investment Holdings
- Gujarat Electricity Regulatory Commission - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- European Bulk Services B.V. - Netherlands
- Gujarat Sidhee Cement - India
- VISA Power Limited - India
- New Zealand Coal & Carbon
- Baramulti Group, Indonesia
- Kepco SPC Power Corporation, Philippines
- Antam Resourcindo - Indonesia
- White Energy Company Limited
- Jorong Barutama Greston.PT - Indonesia
- Maharashtra Electricity Regulatory Commission - India
- Marubeni Corporation - India
- Billiton Holdings Pty Ltd - Australia
- Indian Energy Exchange, India
- Alfred C Toepfer International GmbH - Germany
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- International Coal Ventures Pvt Ltd - India
- Altura Mining Limited, Indonesia
- Chettinad Cement Corporation Ltd - India
- Agrawal Coal Company - India
- Power Finance Corporation Ltd., India
- Indo Tambangraya Megah - Indonesia
- Sojitz Corporation - Japan
- Petron Corporation, Philippines
- Aditya Birla Group - India
- Carbofer General Trading SA - India
- Sakthi Sugars Limited - India
- Uttam Galva Steels Limited - India
- Tata Chemicals Ltd - India
- Ambuja Cements Ltd - India
- Xindia Steels Limited - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Directorate Of Revenue Intelligence - India
- TeaM Sual Corporation - Philippines
- SN Aboitiz Power Inc, Philippines
- PetroVietnam Power Coal Import and Supply Company
- Binh Thuan Hamico - Vietnam
- Bhatia International Limited - India
- Central Java Power - Indonesia
- Indogreen Group - Indonesia
- IEA Clean Coal Centre - UK
- OPG Power Generation Pvt Ltd - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- LBH Netherlands Bv - Netherlands
- Rio Tinto Coal - Australia
- Energy Link Ltd, New Zealand
- MS Steel International - UAE
- Coastal Gujarat Power Limited - India
- Edison Trading Spa - Italy
- Sree Jayajothi Cements Limited - India
- Gujarat Mineral Development Corp Ltd - India
- Indian Oil Corporation Limited
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Krishnapatnam Port Company Ltd. - India
- Sinarmas Energy and Mining - Indonesia
- Parliament of New Zealand
- Heidelberg Cement - Germany
- Georgia Ports Authority, United States
- Bukit Asam (Persero) Tbk - Indonesia
- Savvy Resources Ltd - HongKong
- Siam City Cement - Thailand
- Chamber of Mines of South Africa
- Essar Steel Hazira Ltd - India
- GN Power Mariveles Coal Plant, Philippines
- Deloitte Consulting - India
- GVK Power & Infra Limited - India
- Karaikal Port Pvt Ltd - India
- Thai Mozambique Logistica
- Dalmia Cement Bharat India
- Sarangani Energy Corporation, Philippines
- Renaissance Capital - South Africa
- Jaiprakash Power Ventures ltd
- Global Business Power Corporation, Philippines
- Central Electricity Authority - India
- Wood Mackenzie - Singapore
- Aboitiz Power Corporation - Philippines
- Kapuas Tunggal Persada - Indonesia
- Goldman Sachs - Singapore
- Planning Commission, India
- Siam City Cement PLC, Thailand
- Barasentosa Lestari - Indonesia
- Simpson Spence & Young - Indonesia
- Singapore Mercantile Exchange
- Vizag Seaport Private Limited - India
- Standard Chartered Bank - UAE
- Kohat Cement Company Ltd. - Pakistan
- Meenaskhi Energy Private Limited - India
- Riau Bara Harum - Indonesia
- Neyveli Lignite Corporation Ltd, - India
- San Jose City I Power Corp, Philippines
- Sical Logistics Limited - India
- Metalloyd Limited - United Kingdom
- Oldendorff Carriers - Singapore
- Kalimantan Lumbung Energi - Indonesia
- Kobexindo Tractors - Indoneisa
- Kumho Petrochemical, South Korea
- TNB Fuel Sdn Bhd - Malaysia
- The Treasury - Australian Government
- Holcim Trading Pte Ltd - Singapore
- Kideco Jaya Agung - Indonesia
- Asmin Koalindo Tuhup - Indonesia
- Manunggal Multi Energi - Indonesia
- Jindal Steel & Power Ltd - India
- Semirara Mining and Power Corporation, Philippines
- Cement Manufacturers Association - India
- Mercator Lines Limited - India
- SMC Global Power, Philippines
- Intertek Mineral Services - Indonesia
- GAC Shipping (India) Pvt Ltd
- Formosa Plastics Group - Taiwan
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Borneo Indobara - Indonesia
- Port Waratah Coal Services - Australia
- Anglo American - United Kingdom
- Coalindo Energy - Indonesia
- McConnell Dowell - Australia
- Mintek Dendrill Indonesia
- Larsen & Toubro Limited - India
- Ind-Barath Power Infra Limited - India
- Electricity Authority, New Zealand
- PowerSource Philippines DevCo
- Bangladesh Power Developement Board
- Lanco Infratech Ltd - India
- Bulk Trading Sa - Switzerland
- ICICI Bank Limited - India
- Orica Mining Services - Indonesia
- Attock Cement Pakistan Limited
- Independent Power Producers Association of India
- GMR Energy Limited - India
- CNBM International Corporation - China
- Cigading International Bulk Terminal - Indonesia
- Samtan Co., Ltd - South Korea
- Bhushan Steel Limited - India
- Directorate General of MIneral and Coal - Indonesia
- Medco Energi Mining Internasional
- Interocean Group of Companies - India
- Eastern Energy - Thailand
- Meralco Power Generation, Philippines
- Vedanta Resources Plc - India
- Leighton Contractors Pty Ltd - Australia
- Bayan Resources Tbk. - Indonesia
- Energy Development Corp, Philippines
- Ceylon Electricity Board - Sri Lanka
- Bukit Baiduri Energy - Indonesia
- Kartika Selabumi Mining - Indonesia
- Sindya Power Generating Company Private Ltd
- Therma Luzon, Inc, Philippines
- PNOC Exploration Corporation - Philippines
- Maheswari Brothers Coal Limited - India
- Karbindo Abesyapradhi - Indoneisa
- Vijayanagar Sugar Pvt Ltd - India
- Eastern Coal Council - USA
- Australian Commodity Traders Exchange
- IHS Mccloskey Coal Group - USA
- Economic Council, Georgia
- Pendopo Energi Batubara - Indonesia
- Indonesian Coal Mining Association
- Commonwealth Bank - Australia
- London Commodity Brokers - England
- Coal and Oil Company - UAE
- The University of Queensland
- Romanian Commodities Exchange
- Makarim & Taira - Indonesia
- PTC India Limited - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- Star Paper Mills Limited - India
- Ministry of Finance - Indonesia
- Madhucon Powers Ltd - India
- Indika Energy - Indonesia
- Bharathi Cement Corporation - India
- Rashtriya Ispat Nigam Limited - India
- Ministry of Mines - Canada
- Ministry of Transport, Egypt
- Trasteel International SA, Italy
- ASAPP Information Group - India
- Tamil Nadu electricity Board
- Bhoruka Overseas - Indonesia
- Mjunction Services Limited - India
- Parry Sugars Refinery, India
- Banpu Public Company Limited - Thailand
- Miang Besar Coal Terminal - Indonesia
- Semirara Mining Corp, Philippines
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