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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, 17 February 22
MAJOR INSTITUTIONS PROVIDED OVER $1.5 TRLN TO COAL SECTOR IN 2019-2021, SAYS NGO GROUP - REUTERS
Financial institutions channelled more than $1.5 trillion into the coal industry in loans and underwriting from January 2019 to November 2021, even ...
Thursday, 17 February 22
APAC THERMAL COAL PRICES TO EASE ON END OF INDONESIA EXPORT BAN - FITCH RATINGS
Fitch Ratings-Shanghai/Singapore-14 February 2022: APAC thermal coal prices are likely to come under pressure in the near term due to seasonally we ...
Tuesday, 15 February 22
IS ANOTHER COAL SHORTAGE CRISIS LOOMING OVER INDIA? - BUSINESS STANDARD
In December last year, the Federation of Indian Mineral Industries (FIMI) shot off a letter to the Prime Minister claiming that the coal crisis was ...
Tuesday, 15 February 22
THERMAL COAL'S RECORD PRICE RUN MAY END UP ITS OWN WORST ENEMY - REUTERS
The price of benchmark Australian thermal coal rose last week to trade near record highs, providing a short-term boost to producers but increasing ...
Thursday, 10 February 22
INDONESIA: COAL EXPORT BAN - SKULD
Indonesia's coal export ban in the light of force majeure and off-hire clauses
In January 2022, Indonesia, the world's biggest exporte ...
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- Orica Australia Pty. Ltd.
- Australian Commodity Traders Exchange
- Chettinad Cement Corporation Ltd - India
- Binh Thuan Hamico - Vietnam
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- Eastern Coal Council - USA
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- Electricity Generating Authority of Thailand
- Billiton Holdings Pty Ltd - Australia
- Bangladesh Power Developement Board
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- Directorate General of MIneral and Coal - Indonesia
- Global Green Power PLC Corporation, Philippines
- Indian Energy Exchange, India
- Wood Mackenzie - Singapore
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Sakthi Sugars Limited - India
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- Port Waratah Coal Services - Australia
- South Luzon Thermal Energy Corporation
- Bhatia International Limited - India
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- Toyota Tsusho Corporation, Japan
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- Metalloyd Limited - United Kingdom
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- OPG Power Generation Pvt Ltd - India
- Sarangani Energy Corporation, Philippines
- Miang Besar Coal Terminal - Indonesia
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- Kumho Petrochemical, South Korea
- Vijayanagar Sugar Pvt Ltd - India
- Semirara Mining and Power Corporation, Philippines
- Commonwealth Bank - Australia
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- PetroVietnam Power Coal Import and Supply Company
- Larsen & Toubro Limited - India
- Indonesian Coal Mining Association
- The State Trading Corporation of India Ltd
- Parliament of New Zealand
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- Meralco Power Generation, Philippines
- Jorong Barutama Greston.PT - Indonesia
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- Coal and Oil Company - UAE
- GVK Power & Infra Limited - India
- Ministry of Mines - Canada
- Electricity Authority, New Zealand
- Australian Coal Association
- Medco Energi Mining Internasional
- Georgia Ports Authority, United States
- Videocon Industries ltd - India
- Alfred C Toepfer International GmbH - Germany
- Intertek Mineral Services - Indonesia
- VISA Power Limited - India
- Thiess Contractors Indonesia
- Indian Oil Corporation Limited
- Bank of Tokyo Mitsubishi UFJ Ltd
- Bhoruka Overseas - Indonesia
- Leighton Contractors Pty Ltd - Australia
- Bharathi Cement Corporation - India
- London Commodity Brokers - England
- Malabar Cements Ltd - India
- Global Coal Blending Company Limited - Australia
- Xindia Steels Limited - India
- Sindya Power Generating Company Private Ltd
- Kepco SPC Power Corporation, Philippines
- Karbindo Abesyapradhi - Indoneisa
- Manunggal Multi Energi - Indonesia
- McConnell Dowell - Australia
- Siam City Cement - Thailand
- Planning Commission, India
- Rio Tinto Coal - Australia
- Anglo American - United Kingdom
- Coastal Gujarat Power Limited - India
- Kobexindo Tractors - Indoneisa
- GMR Energy Limited - India
- Banpu Public Company Limited - Thailand
- Trasteel International SA, Italy
- Tata Chemicals Ltd - India
- Power Finance Corporation Ltd., India
- Cement Manufacturers Association - India
- SN Aboitiz Power Inc, Philippines
- Indogreen Group - Indonesia
- Romanian Commodities Exchange
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- Global Business Power Corporation, Philippines
- CIMB Investment Bank - Malaysia
- Gujarat Mineral Development Corp Ltd - India
- Indo Tambangraya Megah - Indonesia
- Kartika Selabumi Mining - Indonesia
- Interocean Group of Companies - India
- Mercator Lines Limited - India
- Makarim & Taira - Indonesia
- Agrawal Coal Company - India
- Gujarat Electricity Regulatory Commission - India
- Altura Mining Limited, Indonesia
- Carbofer General Trading SA - India
- SMG Consultants - Indonesia
- Bulk Trading Sa - Switzerland
- Bhushan Steel Limited - India
- Petrochimia International Co. Ltd.- Taiwan
- Salva Resources Pvt Ltd - India
- MS Steel International - UAE
- IEA Clean Coal Centre - UK
- Coalindo Energy - Indonesia
- PNOC Exploration Corporation - Philippines
- European Bulk Services B.V. - Netherlands
- Kalimantan Lumbung Energi - Indonesia
- Essar Steel Hazira Ltd - India
- International Coal Ventures Pvt Ltd - India
- Chamber of Mines of South Africa
- The University of Queensland
- Bukit Asam (Persero) Tbk - Indonesia
- Barasentosa Lestari - Indonesia
- Renaissance Capital - South Africa
- Meenaskhi Energy Private Limited - India
- Maharashtra Electricity Regulatory Commission - India
- Eastern Energy - Thailand
- Therma Luzon, Inc, Philippines
- Riau Bara Harum - Indonesia
- GN Power Mariveles Coal Plant, Philippines
- Kohat Cement Company Ltd. - Pakistan
- Star Paper Mills Limited - India
- Sojitz Corporation - Japan
- Minerals Council of Australia
- Posco Energy - South Korea
- Sinarmas Energy and Mining - Indonesia
- Price Waterhouse Coopers - Russia
- Energy Development Corp, Philippines
- Gujarat Sidhee Cement - India
- Ceylon Electricity Board - Sri Lanka
- Iligan Light & Power Inc, Philippines
- Mercuria Energy - Indonesia
- Marubeni Corporation - India
- SMC Global Power, Philippines
- Semirara Mining Corp, Philippines
- Offshore Bulk Terminal Pte Ltd, Singapore
- Ministry of Finance - Indonesia
- Tamil Nadu electricity Board
- Standard Chartered Bank - UAE
- Asmin Koalindo Tuhup - Indonesia
- Ministry of Transport, Egypt
- Ind-Barath Power Infra Limited - India
- Bayan Resources Tbk. - Indonesia
- Baramulti Group, Indonesia
- Vizag Seaport Private Limited - India
- Maheswari Brothers Coal Limited - India
- Mjunction Services Limited - India
- Vedanta Resources Plc - India
- Borneo Indobara - Indonesia
- Singapore Mercantile Exchange
- TNB Fuel Sdn Bhd - Malaysia
- Pendopo Energi Batubara - Indonesia
- Rashtriya Ispat Nigam Limited - India
- LBH Netherlands Bv - Netherlands
- Lanco Infratech Ltd - India
- Antam Resourcindo - Indonesia
- Merrill Lynch Commodities Europe
- Madhucon Powers Ltd - India
- Dalmia Cement Bharat India
- Sical Logistics Limited - India
- White Energy Company Limited
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Savvy Resources Ltd - HongKong
- Uttam Galva Steels Limited - India
- Wilmar Investment Holdings
- Bahari Cakrawala Sebuku - Indonesia
- Heidelberg Cement - Germany
- Cigading International Bulk Terminal - Indonesia
- Jaiprakash Power Ventures ltd
- Aditya Birla Group - India
- Holcim Trading Pte Ltd - Singapore
- Pipit Mutiara Jaya. PT, Indonesia
- Mintek Dendrill Indonesia
- Economic Council, Georgia
- San Jose City I Power Corp, Philippines
- Jindal Steel & Power Ltd - India
- IHS Mccloskey Coal Group - USA
- India Bulls Power Limited - India
- Sree Jayajothi Cements Limited - India
- Parry Sugars Refinery, India
- Ambuja Cements Ltd - India
- PowerSource Philippines DevCo
- Timah Investasi Mineral - Indoneisa
- Grasim Industreis Ltd - India
- Siam City Cement PLC, Thailand
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