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