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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 $40,000/day earning bulk carrier to go off hire waiting for bunker supplies), worsening weather conditions, help prevent claims, bundle up several enquiries to achieve volume discounts and even help with bunker planning and suggest the most optimal port or combination of ports to bunker your vessel.
Source: Integr8 Fuels
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Thursday, 07 July 22
COAL INDIA'S PRODUCTION SETS RECORD INCREASE OF 29% YOY AT 36 MT IN Q1FY23 - IIFL SECURITIES
Coal India Limited (CIL) has ended April-June quarter FY’23 capping a historic high of 29% yoy output growth, compared to same quarter FY&rsq ...
Wednesday, 06 July 22
MARKET INSIGHT - INTERMODAL
Following the 3rd Decarbonizing Shipping Forum, held in Hamburg on June 2022, there has been a meaningful resurgence of discussions within the ship ...
Tuesday, 05 July 22
WHY ARE VLSFO PRICES SO HIGH, ESPECIALLY IN SINGAPORE? - STEVE CHRISTY, INTEGR8 FUELS
Tightness in products still trumps talks of recession
Last month we wrote about the fears of recession versus the tightness in product markets ...
Tuesday, 05 July 22
ADANI ENTERPRISES LOWEST BIDDER IN COAL INDIA'S IMPORT TENDER: REPORT - BUSINESS STANDARD
Coal India Ltd floated its first import tender on behalf of power companies, where Adani Enterprises Ltd came out to be the lowest bidder, a report ...
Tuesday, 05 July 22
CHINA POLICY KEY FOR IRON ORE OUTLOOK - ING
China’s covid lockdowns and recessionary risks hit iron ore
Iron ore prices have fallen significantly from their year-to-date high of US$ ...
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- Ministry of Transport, Egypt
- Antam Resourcindo - Indonesia
- Energy Link Ltd, New Zealand
- Power Finance Corporation Ltd., India
- Georgia Ports Authority, United States
- Africa Commodities Group - South Africa
- Thiess Contractors Indonesia
- Kohat Cement Company Ltd. - Pakistan
- Global Green Power PLC Corporation, Philippines
- Commonwealth Bank - Australia
- Latin American Coal - Colombia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Chamber of Mines of South Africa
- Directorate Of Revenue Intelligence - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- New Zealand Coal & Carbon
- GAC Shipping (India) Pvt Ltd
- GMR Energy Limited - India
- Rashtriya Ispat Nigam Limited - India
- Semirara Mining and Power Corporation, Philippines
- Malabar Cements Ltd - India
- Petron Corporation, Philippines
- Bukit Makmur.PT - Indonesia
- Krishnapatnam Port Company Ltd. - India
- Grasim Industreis Ltd - India
- Wood Mackenzie - Singapore
- Australian Commodity Traders Exchange
- Ministry of Mines - Canada
- Jorong Barutama Greston.PT - Indonesia
- Sree Jayajothi Cements Limited - India
- Cigading International Bulk Terminal - Indonesia
- Kalimantan Lumbung Energi - Indonesia
- Jindal Steel & Power Ltd - India
- TNB Fuel Sdn Bhd - Malaysia
- Manunggal Multi Energi - Indonesia
- India Bulls Power Limited - India
- Tamil Nadu electricity Board
- Directorate General of MIneral and Coal - Indonesia
- Billiton Holdings Pty Ltd - Australia
- Bulk Trading Sa - Switzerland
- Mintek Dendrill Indonesia
- Gujarat Sidhee Cement - India
- Indo Tambangraya Megah - Indonesia
- Ind-Barath Power Infra Limited - India
- Asmin Koalindo Tuhup - Indonesia
- IEA Clean Coal Centre - UK
- Independent Power Producers Association of India
- Port Waratah Coal Services - Australia
- Metalloyd Limited - United Kingdom
- Karaikal Port Pvt Ltd - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Miang Besar Coal Terminal - Indonesia
- SMC Global Power, Philippines
- Timah Investasi Mineral - Indoneisa
- Borneo Indobara - Indonesia
- Kapuas Tunggal Persada - Indonesia
- Minerals Council of Australia
- Videocon Industries ltd - India
- Coal and Oil Company - UAE
- Central Java Power - Indonesia
- Ambuja Cements Ltd - India
- Coastal Gujarat Power Limited - India
- Star Paper Mills Limited - India
- SMG Consultants - Indonesia
- Medco Energi Mining Internasional
- CIMB Investment Bank - Malaysia
- Essar Steel Hazira Ltd - India
- Bukit Asam (Persero) Tbk - Indonesia
- Siam City Cement - Thailand
- International Coal Ventures Pvt Ltd - India
- Lanco Infratech Ltd - India
- Cement Manufacturers Association - India
- Globalindo Alam Lestari - Indonesia
- Maheswari Brothers Coal Limited - India
- Kaltim Prima Coal - Indonesia
- PetroVietnam Power Coal Import and Supply Company
- Straits Asia Resources Limited - Singapore
- Standard Chartered Bank - UAE
- Indian Oil Corporation Limited
- Indonesian Coal Mining Association
- Sakthi Sugars Limited - India
- Anglo American - United Kingdom
- Kartika Selabumi Mining - Indonesia
- Karbindo Abesyapradhi - Indoneisa
- Bukit Baiduri Energy - Indonesia
- Bahari Cakrawala Sebuku - Indonesia
- Eastern Coal Council - USA
- ASAPP Information Group - India
- Thai Mozambique Logistica
- Agrawal Coal Company - India
- Bangladesh Power Developement Board
- Kideco Jaya Agung - Indonesia
- OPG Power Generation Pvt Ltd - India
- Vedanta Resources Plc - India
- Formosa Plastics Group - Taiwan
- CNBM International Corporation - China
- Ministry of Finance - Indonesia
- Price Waterhouse Coopers - Russia
- Sical Logistics Limited - India
- Chettinad Cement Corporation Ltd - India
- White Energy Company Limited
- Xindia Steels Limited - India
- SN Aboitiz Power Inc, Philippines
- Interocean Group of Companies - India
- PNOC Exploration Corporation - Philippines
- Simpson Spence & Young - Indonesia
- LBH Netherlands Bv - Netherlands
- The University of Queensland
- Orica Australia Pty. Ltd.
- MS Steel International - UAE
- Australian Coal Association
- Rio Tinto Coal - Australia
- Dalmia Cement Bharat India
- Edison Trading Spa - Italy
- Ceylon Electricity Board - Sri Lanka
- Vijayanagar Sugar Pvt Ltd - India
- Posco Energy - South Korea
- European Bulk Services B.V. - Netherlands
- Coalindo Energy - Indonesia
- Singapore Mercantile Exchange
- The State Trading Corporation of India Ltd
- Kepco SPC Power Corporation, Philippines
- Savvy Resources Ltd - HongKong
- Trasteel International SA, Italy
- IHS Mccloskey Coal Group - USA
- Makarim & Taira - Indonesia
- Barasentosa Lestari - Indonesia
- Sindya Power Generating Company Private Ltd
- Goldman Sachs - Singapore
- Alfred C Toepfer International GmbH - Germany
- Planning Commission, India
- South Luzon Thermal Energy Corporation
- Vizag Seaport Private Limited - India
- San Jose City I Power Corp, Philippines
- McConnell Dowell - Australia
- Leighton Contractors Pty Ltd - Australia
- GN Power Mariveles Coal Plant, Philippines
- TeaM Sual Corporation - Philippines
- Siam City Cement PLC, Thailand
- Bhoruka Overseas - Indonesia
- Renaissance Capital - South Africa
- AsiaOL BioFuels Corp., Philippines
- Heidelberg Cement - Germany
- Samtan Co., Ltd - South Korea
- Gujarat Mineral Development Corp Ltd - India
- Larsen & Toubro Limited - India
- Global Coal Blending Company Limited - Australia
- Intertek Mineral Services - Indonesia
- Uttam Galva Steels Limited - India
- Central Electricity Authority - India
- Orica Mining Services - Indonesia
- Carbofer General Trading SA - India
- Indogreen Group - Indonesia
- London Commodity Brokers - England
- Attock Cement Pakistan Limited
- Electricity Generating Authority of Thailand
- Therma Luzon, Inc, Philippines
- Deloitte Consulting - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Romanian Commodities Exchange
- Economic Council, Georgia
- Banpu Public Company Limited - Thailand
- Marubeni Corporation - India
- Jaiprakash Power Ventures ltd
- Iligan Light & Power Inc, Philippines
- Merrill Lynch Commodities Europe
- Energy Development Corp, Philippines
- Baramulti Group, Indonesia
- Meenaskhi Energy Private Limited - India
- Sarangani Energy Corporation, Philippines
- Electricity Authority, New Zealand
- Maharashtra Electricity Regulatory Commission - India
- Pendopo Energi Batubara - Indonesia
- Gujarat Electricity Regulatory Commission - India
- Parry Sugars Refinery, India
- Parliament of New Zealand
- Sojitz Corporation - Japan
- Sinarmas Energy and Mining - Indonesia
- Kobexindo Tractors - Indoneisa
- Bhatia International Limited - India
- Aboitiz Power Corporation - Philippines
- Bharathi Cement Corporation - India
- Aditya Birla Group - India
- Binh Thuan Hamico - Vietnam
- Salva Resources Pvt Ltd - India
- PTC India Limited - India
- Indika Energy - Indonesia
- Neyveli Lignite Corporation Ltd, - India
- ICICI Bank Limited - India
- Madhucon Powers Ltd - India
- Semirara Mining Corp, Philippines
- Bayan Resources Tbk. - Indonesia
- Global Business Power Corporation, Philippines
- Offshore Bulk Terminal Pte Ltd, Singapore
- Indian Energy Exchange, India
- Wilmar Investment Holdings
- VISA Power Limited - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- Pipit Mutiara Jaya. PT, Indonesia
- Toyota Tsusho Corporation, Japan
- Meralco Power Generation, Philippines
- The Treasury - Australian Government
- Petrochimia International Co. Ltd.- Taiwan
- GVK Power & Infra Limited - India
- Riau Bara Harum - Indonesia
- Mjunction Services Limited - India
- Holcim Trading Pte Ltd - Singapore
- Bhushan Steel Limited - India
- Tata Chemicals Ltd - India
- Mercuria Energy - Indonesia
- Kumho Petrochemical, South Korea
- Oldendorff Carriers - Singapore
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Mercator Lines Limited - India
- Altura Mining Limited, Indonesia
- PowerSource Philippines DevCo
- Eastern Energy - Thailand
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