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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, 10 February 22
EIA ANALYSIS CONSIDERS DIFFERENT OUTCOMES FOR COAL MARKETS IN INDIA AND SOUTHEAST ASIA
In our International Energy Outlook 2021 (IEO2021) Issues in Focus: Uncertainty in Coal Trade in India and Greater Southeast Asia, we analyze three ...
Wednesday, 09 February 22
OIL PRICES: "IT'S GOING TO BE VERY EASY" TO GET TO $100/BARREL, ANALYST SAYS - YAHOO FINANCE
Energy and oil prices have been on fire over the last six months — and expect them to go higher, says one analyst.
“For ...
Wednesday, 09 February 22
MARKET INSIGHT - INTERMODAL
Iron ore prices have jumped significantly in the week prior to the Chinese New Year with traders and producers stocking up on raw materials. China& ...
Wednesday, 09 February 22
FEBRUARY HBA HITS RECORD HIGH IN 2022 ON INDONESIA’S EXPORT BAN IN JANUARY, WORSEN SUPPLY, UKRAINE TENSIONS
COALspot.com: Indonesian Coal Price Reference for February in a steep climb from January 2022.
As expected in January the Indonesia ...
Wednesday, 09 February 22
CHINESE COAL MARKS BEST DAY IN 4 MONTHS ON TIGHT SUPPLY, HIGH DEMAND - REUTERS
China’s coal futures on Tuesday recorded their best session since Bejing’s mid-October intervention to cool runaway prices, aided by co ...
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- Kobexindo Tractors - Indoneisa
- Kumho Petrochemical, South Korea
- Alfred C Toepfer International GmbH - Germany
- The State Trading Corporation of India Ltd
- Toyota Tsusho Corporation, Japan
- Parliament of New Zealand
- Thai Mozambique Logistica
- Ceylon Electricity Board - Sri Lanka
- Renaissance Capital - South Africa
- Grasim Industreis Ltd - India
- PowerSource Philippines DevCo
- Jindal Steel & Power Ltd - India
- Romanian Commodities Exchange
- Oldendorff Carriers - Singapore
- Kepco SPC Power Corporation, Philippines
- Globalindo Alam Lestari - Indonesia
- Indo Tambangraya Megah - Indonesia
- Malabar Cements Ltd - India
- GVK Power & Infra Limited - India
- Bhatia International Limited - India
- Eastern Energy - Thailand
- Bharathi Cement Corporation - India
- Sree Jayajothi Cements Limited - India
- Bhoruka Overseas - Indonesia
- Global Green Power PLC Corporation, Philippines
- Wood Mackenzie - Singapore
- AsiaOL BioFuels Corp., Philippines
- Parry Sugars Refinery, India
- Pendopo Energi Batubara - Indonesia
- Orica Mining Services - Indonesia
- McConnell Dowell - Australia
- Tata Chemicals Ltd - India
- Anglo American - United Kingdom
- Uttam Galva Steels Limited - India
- CNBM International Corporation - China
- Meenaskhi Energy Private Limited - India
- GMR Energy Limited - India
- Billiton Holdings Pty Ltd - Australia
- Maharashtra Electricity Regulatory Commission - India
- Miang Besar Coal Terminal - Indonesia
- Kalimantan Lumbung Energi - Indonesia
- Electricity Generating Authority of Thailand
- Leighton Contractors Pty Ltd - Australia
- Attock Cement Pakistan Limited
- Jorong Barutama Greston.PT - Indonesia
- Medco Energi Mining Internasional
- Altura Mining Limited, Indonesia
- Central Electricity Authority - India
- Simpson Spence & Young - Indonesia
- Planning Commission, India
- Agrawal Coal Company - India
- Central Java Power - Indonesia
- LBH Netherlands Bv - Netherlands
- Ministry of Mines - Canada
- Bukit Baiduri Energy - Indonesia
- Formosa Plastics Group - Taiwan
- Goldman Sachs - Singapore
- Africa Commodities Group - South Africa
- Indian Oil Corporation Limited
- Videocon Industries ltd - India
- Bahari Cakrawala Sebuku - Indonesia
- Gujarat Electricity Regulatory Commission - India
- Independent Power Producers Association of India
- Chettinad Cement Corporation Ltd - India
- Sinarmas Energy and Mining - Indonesia
- Posco Energy - South Korea
- Xindia Steels Limited - India
- International Coal Ventures Pvt Ltd - India
- The University of Queensland
- London Commodity Brokers - England
- Bukit Makmur.PT - Indonesia
- Straits Asia Resources Limited - Singapore
- Metalloyd Limited - United Kingdom
- Rashtriya Ispat Nigam Limited - India
- Bhushan Steel Limited - India
- Marubeni Corporation - India
- Larsen & Toubro Limited - India
- Eastern Coal Council - USA
- Aditya Birla Group - India
- Asmin Koalindo Tuhup - Indonesia
- Directorate Of Revenue Intelligence - India
- OPG Power Generation Pvt Ltd - India
- Essar Steel Hazira Ltd - India
- Ind-Barath Power Infra Limited - India
- San Jose City I Power Corp, Philippines
- Edison Trading Spa - Italy
- Kartika Selabumi Mining - Indonesia
- Salva Resources Pvt Ltd - India
- Siam City Cement - Thailand
- CIMB Investment Bank - Malaysia
- Gujarat Mineral Development Corp Ltd - India
- Neyveli Lignite Corporation Ltd, - India
- Ambuja Cements Ltd - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Sindya Power Generating Company Private Ltd
- Cigading International Bulk Terminal - Indonesia
- Baramulti Group, Indonesia
- Petron Corporation, Philippines
- Commonwealth Bank - Australia
- Port Waratah Coal Services - Australia
- TNB Fuel Sdn Bhd - Malaysia
- SMG Consultants - Indonesia
- Mercator Lines Limited - India
- Lanco Infratech Ltd - India
- Banpu Public Company Limited - Thailand
- Power Finance Corporation Ltd., India
- Meralco Power Generation, Philippines
- Indogreen Group - Indonesia
- Tamil Nadu electricity Board
- Kideco Jaya Agung - Indonesia
- Vedanta Resources Plc - India
- Petrochimia International Co. Ltd.- Taiwan
- Ministry of Transport, Egypt
- Georgia Ports Authority, United States
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- MS Steel International - UAE
- Thiess Contractors Indonesia
- SMC Global Power, Philippines
- PNOC Exploration Corporation - Philippines
- Interocean Group of Companies - India
- Vijayanagar Sugar Pvt Ltd - India
- Bangladesh Power Developement Board
- Australian Coal Association
- Coastal Gujarat Power Limited - India
- Rio Tinto Coal - Australia
- Energy Development Corp, Philippines
- Global Business Power Corporation, Philippines
- Indika Energy - Indonesia
- Jaiprakash Power Ventures ltd
- Holcim Trading Pte Ltd - Singapore
- Indonesian Coal Mining Association
- Intertek Mineral Services - Indonesia
- Dalmia Cement Bharat India
- Price Waterhouse Coopers - Russia
- Directorate General of MIneral and Coal - Indonesia
- Karaikal Port Pvt Ltd - India
- New Zealand Coal & Carbon
- Semirara Mining Corp, Philippines
- Sarangani Energy Corporation, Philippines
- Electricity Authority, New Zealand
- Karbindo Abesyapradhi - Indoneisa
- Standard Chartered Bank - UAE
- Semirara Mining and Power Corporation, Philippines
- IHS Mccloskey Coal Group - USA
- Chamber of Mines of South Africa
- Barasentosa Lestari - Indonesia
- White Energy Company Limited
- Mintek Dendrill Indonesia
- Therma Luzon, Inc, Philippines
- ICICI Bank Limited - India
- Antam Resourcindo - Indonesia
- Savvy Resources Ltd - HongKong
- Borneo Indobara - Indonesia
- GN Power Mariveles Coal Plant, Philippines
- GAC Shipping (India) Pvt Ltd
- VISA Power Limited - India
- Maheswari Brothers Coal Limited - India
- Orica Australia Pty. Ltd.
- Minerals Council of Australia
- Mjunction Services Limited - India
- South Luzon Thermal Energy Corporation
- Sakthi Sugars Limited - India
- Binh Thuan Hamico - Vietnam
- Carbofer General Trading SA - India
- Coalindo Energy - Indonesia
- Siam City Cement PLC, Thailand
- Offshore Bulk Terminal Pte Ltd, Singapore
- IEA Clean Coal Centre - UK
- Heidelberg Cement - Germany
- PTC India Limited - India
- Kohat Cement Company Ltd. - Pakistan
- Vizag Seaport Private Limited - India
- SN Aboitiz Power Inc, Philippines
- Bukit Asam (Persero) Tbk - Indonesia
- Indian Energy Exchange, India
- Aboitiz Power Corporation - Philippines
- European Bulk Services B.V. - Netherlands
- TeaM Sual Corporation - Philippines
- The Treasury - Australian Government
- PetroVietnam Power Coal Import and Supply Company
- Timah Investasi Mineral - Indoneisa
- Sojitz Corporation - Japan
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Krishnapatnam Port Company Ltd. - India
- Wilmar Investment Holdings
- Makarim & Taira - Indonesia
- Star Paper Mills Limited - India
- Kapuas Tunggal Persada - Indonesia
- Trasteel International SA, Italy
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Latin American Coal - Colombia
- Energy Link Ltd, New Zealand
- Ministry of Finance - Indonesia
- Coal and Oil Company - UAE
- Sical Logistics Limited - India
- Cement Manufacturers Association - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- Kaltim Prima Coal - Indonesia
- Singapore Mercantile Exchange
- Mercuria Energy - Indonesia
- ASAPP Information Group - India
- India Bulls Power Limited - India
- Bulk Trading Sa - Switzerland
- Economic Council, Georgia
- Madhucon Powers Ltd - India
- Riau Bara Harum - Indonesia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Deloitte Consulting - India
- Global Coal Blending Company Limited - Australia
- Gujarat Sidhee Cement - India
- Iligan Light & Power Inc, Philippines
- Samtan Co., Ltd - South Korea
- Merrill Lynch Commodities Europe
- Bayan Resources Tbk. - Indonesia
- Pipit Mutiara Jaya. PT, Indonesia
- Manunggal Multi Energi - Indonesia
- Australian Commodity Traders Exchange
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