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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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Monday, 04 July 22
INDONESIAN COAL PRICE REFERENCE SLIGHTLY DOWN IN JULY
COALspot.com: Indonesian Coal Price Reference for July delivery drops 1.52 per cent month on month.
The Indonesian Coal Price Refere ...
Sunday, 03 July 22
CHINESE VICE PREMIER STRESSES CLEAN, EFFICIENT USE OF COAL - XINHUA
Chinese Vice Premier Han Zheng has stressed efforts to promote the clean and efficient use of coal, and pursue green, low-carbon and high-quality d ...
Sunday, 03 July 22
SOVEREIGN SECTOR OUTLOOK REVISED TO NEUTRAL ON UKRAINE WAR IMPACT - FITCH RATINGS
The deterioration in global sovereign credit conditions this year relative to our expectations at end-2021 has caused Fitch Ratings to change its g ...
Saturday, 02 July 22
GLOBAL SEABORNE COAL EXPORTS IN 2021 INCREASED BY 4.4% Y-O-Y TO 1147 MLN TONNES - BANCHERO COSTA
In the full 12 months of 2021, global seaborne coal exports increased by +4.4% y-o-y to 1147 mln tonnes, from 1099 mln tonnes in 2020, according to ...
Friday, 01 July 22
INDIA'S TOP CEMENT MAKER PAYING FOR RUSSIAN COAL IN CHINESE YUAN - REUTERS
India’s biggest cement producer, UltraTech Cement ULTC.NS, is importing a cargo of Russian coal and paying using Chinese yuan, according to a ...
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- GMR Energy Limited - India
- Indian Oil Corporation Limited
- Iligan Light & Power Inc, Philippines
- Binh Thuan Hamico - Vietnam
- Trasteel International SA, Italy
- Semirara Mining and Power Corporation, Philippines
- PetroVietnam Power Coal Import and Supply Company
- Wilmar Investment Holdings
- Tata Chemicals Ltd - India
- Deloitte Consulting - India
- Madhucon Powers Ltd - India
- Marubeni Corporation - India
- Rio Tinto Coal - Australia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Aditya Birla Group - India
- Electricity Authority, New Zealand
- The State Trading Corporation of India Ltd
- Bayan Resources Tbk. - Indonesia
- AsiaOL BioFuels Corp., Philippines
- Gujarat Sidhee Cement - India
- Timah Investasi Mineral - Indoneisa
- Wood Mackenzie - Singapore
- Renaissance Capital - South Africa
- Directorate Of Revenue Intelligence - India
- Thai Mozambique Logistica
- Mercator Lines Limited - India
- Economic Council, Georgia
- Sinarmas Energy and Mining - Indonesia
- Independent Power Producers Association of India
- Billiton Holdings Pty Ltd - Australia
- Energy Link Ltd, New Zealand
- Port Waratah Coal Services - Australia
- TeaM Sual Corporation - Philippines
- Power Finance Corporation Ltd., India
- Ambuja Cements Ltd - India
- Africa Commodities Group - South Africa
- Ministry of Mines - Canada
- Miang Besar Coal Terminal - Indonesia
- Toyota Tsusho Corporation, Japan
- SMG Consultants - Indonesia
- Borneo Indobara - Indonesia
- Energy Development Corp, Philippines
- Bank of Tokyo Mitsubishi UFJ Ltd
- Sojitz Corporation - Japan
- New Zealand Coal & Carbon
- Eastern Coal Council - USA
- Pendopo Energi Batubara - Indonesia
- Mercuria Energy - Indonesia
- Cement Manufacturers Association - India
- Planning Commission, India
- Malabar Cements Ltd - India
- Bangladesh Power Developement Board
- Semirara Mining Corp, Philippines
- PowerSource Philippines DevCo
- Sindya Power Generating Company Private Ltd
- Altura Mining Limited, Indonesia
- Parry Sugars Refinery, India
- Kapuas Tunggal Persada - Indonesia
- SN Aboitiz Power Inc, Philippines
- Kumho Petrochemical, South Korea
- Gujarat Mineral Development Corp Ltd - India
- Anglo American - United Kingdom
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Salva Resources Pvt Ltd - India
- Commonwealth Bank - Australia
- Offshore Bulk Terminal Pte Ltd, Singapore
- Kaltim Prima Coal - Indonesia
- Orica Australia Pty. Ltd.
- PTC India Limited - India
- Karbindo Abesyapradhi - Indoneisa
- Holcim Trading Pte Ltd - Singapore
- Kepco SPC Power Corporation, Philippines
- SMC Global Power, Philippines
- South Luzon Thermal Energy Corporation
- Antam Resourcindo - Indonesia
- Mjunction Services Limited - India
- Georgia Ports Authority, United States
- Intertek Mineral Services - Indonesia
- Alfred C Toepfer International GmbH - Germany
- Electricity Generating Authority of Thailand
- Indian Energy Exchange, India
- Karaikal Port Pvt Ltd - India
- Vijayanagar Sugar Pvt Ltd - India
- VISA Power Limited - India
- Australian Coal Association
- Directorate General of MIneral and Coal - Indonesia
- Bukit Makmur.PT - Indonesia
- Neyveli Lignite Corporation Ltd, - India
- Kalimantan Lumbung Energi - Indonesia
- Chamber of Mines of South Africa
- Central Java Power - Indonesia
- MS Steel International - UAE
- Riau Bara Harum - Indonesia
- IHS Mccloskey Coal Group - USA
- Kobexindo Tractors - Indoneisa
- Medco Energi Mining Internasional
- Sakthi Sugars Limited - India
- Lanco Infratech Ltd - India
- Meenaskhi Energy Private Limited - India
- Videocon Industries ltd - India
- Standard Chartered Bank - UAE
- Formosa Plastics Group - Taiwan
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Kartika Selabumi Mining - Indonesia
- Leighton Contractors Pty Ltd - Australia
- Siam City Cement PLC, Thailand
- Rashtriya Ispat Nigam Limited - India
- Minerals Council of Australia
- London Commodity Brokers - England
- IEA Clean Coal Centre - UK
- Gujarat Electricity Regulatory Commission - India
- Ministry of Transport, Egypt
- Coalindo Energy - Indonesia
- Price Waterhouse Coopers - Russia
- The Treasury - Australian Government
- Bhoruka Overseas - Indonesia
- Central Electricity Authority - India
- Goldman Sachs - Singapore
- Indogreen Group - Indonesia
- Bukit Baiduri Energy - Indonesia
- Australian Commodity Traders Exchange
- Essar Steel Hazira Ltd - India
- Oldendorff Carriers - Singapore
- Asmin Koalindo Tuhup - Indonesia
- GVK Power & Infra Limited - India
- Petron Corporation, Philippines
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Larsen & Toubro Limited - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- OPG Power Generation Pvt Ltd - India
- Indonesian Coal Mining Association
- Indika Energy - Indonesia
- Bharathi Cement Corporation - India
- Aboitiz Power Corporation - Philippines
- Romanian Commodities Exchange
- Singapore Mercantile Exchange
- Ind-Barath Power Infra Limited - India
- Tamil Nadu electricity Board
- Jindal Steel & Power Ltd - India
- McConnell Dowell - Australia
- LBH Netherlands Bv - Netherlands
- Jaiprakash Power Ventures ltd
- Carbofer General Trading SA - India
- Vedanta Resources Plc - India
- Attock Cement Pakistan Limited
- Mintek Dendrill Indonesia
- Pipit Mutiara Jaya. PT, Indonesia
- Bulk Trading Sa - Switzerland
- Coal and Oil Company - UAE
- Interocean Group of Companies - India
- Therma Luzon, Inc, Philippines
- Bhatia International Limited - India
- GN Power Mariveles Coal Plant, Philippines
- Orica Mining Services - Indonesia
- Ceylon Electricity Board - Sri Lanka
- Eastern Energy - Thailand
- GAC Shipping (India) Pvt Ltd
- Krishnapatnam Port Company Ltd. - India
- Posco Energy - South Korea
- Maheswari Brothers Coal Limited - India
- Agrawal Coal Company - India
- Straits Asia Resources Limited - Singapore
- Siam City Cement - Thailand
- Globalindo Alam Lestari - Indonesia
- Bukit Asam (Persero) Tbk - Indonesia
- Barasentosa Lestari - Indonesia
- Baramulti Group, Indonesia
- Vizag Seaport Private Limited - India
- The University of Queensland
- Merrill Lynch Commodities Europe
- PNOC Exploration Corporation - Philippines
- Sarangani Energy Corporation, Philippines
- Savvy Resources Ltd - HongKong
- Latin American Coal - Colombia
- Maharashtra Electricity Regulatory Commission - India
- Jorong Barutama Greston.PT - Indonesia
- Petrochimia International Co. Ltd.- Taiwan
- Global Green Power PLC Corporation, Philippines
- Coastal Gujarat Power Limited - India
- Grasim Industreis Ltd - India
- Kideco Jaya Agung - Indonesia
- Bhushan Steel Limited - India
- ICICI Bank Limited - India
- White Energy Company Limited
- Parliament of New Zealand
- Samtan Co., Ltd - South Korea
- Sical Logistics Limited - India
- Star Paper Mills Limited - India
- Heidelberg Cement - Germany
- Meralco Power Generation, Philippines
- Thiess Contractors Indonesia
- Kohat Cement Company Ltd. - Pakistan
- European Bulk Services B.V. - Netherlands
- San Jose City I Power Corp, Philippines
- Ministry of Finance - Indonesia
- Dalmia Cement Bharat India
- Metalloyd Limited - United Kingdom
- Makarim & Taira - Indonesia
- India Bulls Power Limited - India
- ASAPP Information Group - India
- Banpu Public Company Limited - Thailand
- Xindia Steels Limited - India
- CIMB Investment Bank - Malaysia
- Sree Jayajothi Cements Limited - India
- TNB Fuel Sdn Bhd - Malaysia
- Manunggal Multi Energi - Indonesia
- Bahari Cakrawala Sebuku - Indonesia
- Simpson Spence & Young - Indonesia
- Indo Tambangraya Megah - Indonesia
- Chettinad Cement Corporation Ltd - India
- Cigading International Bulk Terminal - Indonesia
- International Coal Ventures Pvt Ltd - India
- Global Business Power Corporation, Philippines
- Edison Trading Spa - Italy
- Uttam Galva Steels Limited - India
- Global Coal Blending Company Limited - Australia
- CNBM International Corporation - China
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