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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
SEEING RED? - WOOD MACKENZIE
What a Republican mid-term victory could mean for US energy and climate policy
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Thursday, 14 July 22
INDIA'S COAL IMPORTS HIT RECORD HIGH IN JUNE - REUTERS
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Wednesday, 13 July 22
KOWEPO TO IMPORT 2.79 MILLION TONS OF LOW TO MEDIUM COAL
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Wednesday, 13 July 22
HAVE MINERS MISSED THE BOAT TO INVEST AND GET AHEAD OF THE ENERGY TRANSITION? - WOOD MACKENZIE
Miners are in rude health, benefiting from economic stimuli, the post-pandemic recovery and associated supply constraints. Initially the Ukraine wa ...
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- Chettinad Cement Corporation Ltd - India
- Planning Commission, India
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- Indonesian Coal Mining Association
- India Bulls Power Limited - India
- Indian Oil Corporation Limited
- Directorate Of Revenue Intelligence - India
- Kumho Petrochemical, South Korea
- Larsen & Toubro Limited - India
- Lanco Infratech Ltd - India
- Star Paper Mills Limited - India
- Kartika Selabumi Mining - Indonesia
- Cigading International Bulk Terminal - Indonesia
- LBH Netherlands Bv - Netherlands
- Siam City Cement PLC, Thailand
- Therma Luzon, Inc, Philippines
- Barasentosa Lestari - Indonesia
- Independent Power Producers Association of India
- Indogreen Group - Indonesia
- Ceylon Electricity Board - Sri Lanka
- Standard Chartered Bank - UAE
- Neyveli Lignite Corporation Ltd, - India
- Central Electricity Authority - India
- Goldman Sachs - Singapore
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- Orica Mining Services - Indonesia
- TeaM Sual Corporation - Philippines
- Ministry of Mines - Canada
- Thai Mozambique Logistica
- Eastern Coal Council - USA
- Asmin Koalindo Tuhup - Indonesia
- Interocean Group of Companies - India
- Eastern Energy - Thailand
- Uttam Galva Steels Limited - India
- Borneo Indobara - Indonesia
- Bangladesh Power Developement Board
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Offshore Bulk Terminal Pte Ltd, Singapore
- Miang Besar Coal Terminal - Indonesia
- Renaissance Capital - South Africa
- Mjunction Services Limited - India
- Directorate General of MIneral and Coal - Indonesia
- International Coal Ventures Pvt Ltd - India
- Dalmia Cement Bharat India
- Pendopo Energi Batubara - Indonesia
- Indian Energy Exchange, India
- Leighton Contractors Pty Ltd - Australia
- OPG Power Generation Pvt Ltd - India
- SN Aboitiz Power Inc, Philippines
- Maharashtra Electricity Regulatory Commission - India
- Parry Sugars Refinery, India
- Attock Cement Pakistan Limited
- Bulk Trading Sa - Switzerland
- Samtan Co., Ltd - South Korea
- GN Power Mariveles Coal Plant, Philippines
- Bukit Makmur.PT - Indonesia
- Kideco Jaya Agung - Indonesia
- Globalindo Alam Lestari - Indonesia
- GMR Energy Limited - India
- Baramulti Group, Indonesia
- VISA Power Limited - India
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- Sinarmas Energy and Mining - Indonesia
- Essar Steel Hazira Ltd - India
- Madhucon Powers Ltd - India
- Sical Logistics Limited - India
- Energy Development Corp, Philippines
- Maheswari Brothers Coal Limited - India
- Commonwealth Bank - Australia
- Singapore Mercantile Exchange
- Salva Resources Pvt Ltd - India
- Gujarat Sidhee Cement - India
- White Energy Company Limited
- Wood Mackenzie - Singapore
- European Bulk Services B.V. - Netherlands
- Global Coal Blending Company Limited - Australia
- Power Finance Corporation Ltd., India
- Meenaskhi Energy Private Limited - India
- San Jose City I Power Corp, Philippines
- Electricity Authority, New Zealand
- PTC India Limited - India
- Latin American Coal - Colombia
- Electricity Generating Authority of Thailand
- Kalimantan Lumbung Energi - Indonesia
- Jindal Steel & Power Ltd - India
- Heidelberg Cement - Germany
- Aditya Birla Group - India
- Bharathi Cement Corporation - India
- Ambuja Cements Ltd - India
- SMG Consultants - Indonesia
- CIMB Investment Bank - Malaysia
- Energy Link Ltd, New Zealand
- Vijayanagar Sugar Pvt Ltd - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Economic Council, Georgia
- Bhatia International Limited - India
- GVK Power & Infra Limited - India
- Coastal Gujarat Power Limited - India
- Jorong Barutama Greston.PT - Indonesia
- The State Trading Corporation of India Ltd
- Metalloyd Limited - United Kingdom
- Price Waterhouse Coopers - Russia
- Edison Trading Spa - Italy
- TNB Fuel Sdn Bhd - Malaysia
- PNOC Exploration Corporation - Philippines
- Global Business Power Corporation, Philippines
- Gujarat Electricity Regulatory Commission - India
- Bukit Baiduri Energy - Indonesia
- Sojitz Corporation - Japan
- Mercator Lines Limited - India
- Sarangani Energy Corporation, Philippines
- Romanian Commodities Exchange
- SMC Global Power, Philippines
- Rashtriya Ispat Nigam Limited - India
- South Luzon Thermal Energy Corporation
- Makarim & Taira - Indonesia
- Global Green Power PLC Corporation, Philippines
- Oldendorff Carriers - Singapore
- Ministry of Finance - Indonesia
- Bhushan Steel Limited - India
- Gujarat Mineral Development Corp Ltd - India
- Semirara Mining and Power Corporation, Philippines
- Intertek Mineral Services - Indonesia
- Africa Commodities Group - South Africa
- Malabar Cements Ltd - India
- Timah Investasi Mineral - Indoneisa
- Rio Tinto Coal - Australia
- Siam City Cement - Thailand
- Medco Energi Mining Internasional
- Kobexindo Tractors - Indoneisa
- Kapuas Tunggal Persada - Indonesia
- Petron Corporation, Philippines
- The Treasury - Australian Government
- Deloitte Consulting - India
- Antam Resourcindo - Indonesia
- Vizag Seaport Private Limited - India
- Kohat Cement Company Ltd. - Pakistan
- Posco Energy - South Korea
- Billiton Holdings Pty Ltd - Australia
- Agrawal Coal Company - India
- Banpu Public Company Limited - Thailand
- Xindia Steels Limited - India
- Karbindo Abesyapradhi - Indoneisa
- Manunggal Multi Energi - Indonesia
- Tata Chemicals Ltd - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Bayan Resources Tbk. - Indonesia
- Riau Bara Harum - Indonesia
- New Zealand Coal & Carbon
- Vedanta Resources Plc - India
- Videocon Industries ltd - India
- GAC Shipping (India) Pvt Ltd
- Mercuria Energy - Indonesia
- Bahari Cakrawala Sebuku - Indonesia
- Indika Energy - Indonesia
- Karaikal Port Pvt Ltd - India
- Ministry of Transport, Egypt
- ASAPP Information Group - India
- Bukit Asam (Persero) Tbk - Indonesia
- Marubeni Corporation - India
- Coal and Oil Company - UAE
- Petrochimia International Co. Ltd.- Taiwan
- Orica Australia Pty. Ltd.
- Sindya Power Generating Company Private Ltd
- ICICI Bank Limited - India
- Trasteel International SA, Italy
- IEA Clean Coal Centre - UK
- Wilmar Investment Holdings
- Aboitiz Power Corporation - Philippines
- Kaltim Prima Coal - Indonesia
- Coalindo Energy - Indonesia
- Thiess Contractors Indonesia
- Binh Thuan Hamico - Vietnam
- Grasim Industreis Ltd - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Australian Coal Association
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Savvy Resources Ltd - HongKong
- Cement Manufacturers Association - India
- Altura Mining Limited, Indonesia
- CNBM International Corporation - China
- Merrill Lynch Commodities Europe
- Pipit Mutiara Jaya. PT, Indonesia
- Alfred C Toepfer International GmbH - Germany
- Krishnapatnam Port Company Ltd. - India
- Mintek Dendrill Indonesia
- Kepco SPC Power Corporation, Philippines
- PetroVietnam Power Coal Import and Supply Company
- MS Steel International - UAE
- Toyota Tsusho Corporation, Japan
- IHS Mccloskey Coal Group - USA
- The University of Queensland
- Simpson Spence & Young - Indonesia
- Tamil Nadu electricity Board
- Jaiprakash Power Ventures ltd
- Australian Commodity Traders Exchange
- Meralco Power Generation, Philippines
- Holcim Trading Pte Ltd - Singapore
- McConnell Dowell - Australia
- Parliament of New Zealand
- Ind-Barath Power Infra Limited - India
- Formosa Plastics Group - Taiwan
- Sakthi Sugars Limited - India
- PowerSource Philippines DevCo
- Anglo American - United Kingdom
- Bank of Tokyo Mitsubishi UFJ Ltd
- AsiaOL BioFuels Corp., Philippines
- London Commodity Brokers - England
- Iligan Light & Power Inc, Philippines
- Georgia Ports Authority, United States
- Port Waratah Coal Services - Australia
- Bhoruka Overseas - Indonesia
- Minerals Council of Australia
- Sree Jayajothi Cements Limited - India
- Carbofer General Trading SA - India
- Chamber of Mines of South Africa
- Semirara Mining Corp, Philippines
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