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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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Friday, 04 February 22
RENEWABLES ON THE RISE, COAL CONTINUOUSLY FALLING - EUROPEAN COMMISSION
Although oil (34.5%) and natural gas (23.7%) were still the most important fuel sources in the EU energy mix in 2020, renewable energy’s shar ...
Thursday, 03 February 22
COAL SHORTAGE NOW AT ALARMING LEVELS, SAY ALUMINIUM PRODUCERS - IANS
With no relief in sight despite coal stocks running critically low and production disruptions looming across the Indian aluminium sector, the Alumi ...
Wednesday, 02 February 22
HIGH COKING COAL PRICES PROVIDE GLIMPSE INTO STEELMAKING'S FUTURE - MCKINSEY
Last year was a volatile one in global commodity markets. Demand for coking coal, an essential raw material in the production of steel, was extreme ...
Wednesday, 02 February 22
INDONESIA'S RESTRICTIONS ON COMMODITIES RATTLE MARKETS, MORE MOVES LIKELY - REUTERS
In just the first month of this year, Indonesian policymakers have rattled global markets with restrictions on some of its biggest commodities expo ...
Wednesday, 02 February 22
CHINA'S TOP COAL PRODUCER FORECASTS 28 PCT PROFIT GROWTH IN 2021 - XINHUA
China Shenhua Energy Company Limited, one of the country’s biggest coal producers, said its net profits are expected to jump by 28 percent in ...
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- Bhatia International Limited - India
- Uttam Galva Steels Limited - India
- Maheswari Brothers Coal Limited - India
- Sarangani Energy Corporation, Philippines
- Price Waterhouse Coopers - Russia
- Meenaskhi Energy Private Limited - India
- Standard Chartered Bank - UAE
- Globalindo Alam Lestari - Indonesia
- Bahari Cakrawala Sebuku - Indonesia
- Holcim Trading Pte Ltd - Singapore
- GAC Shipping (India) Pvt Ltd
- Bank of Tokyo Mitsubishi UFJ Ltd
- Romanian Commodities Exchange
- PNOC Exploration Corporation - Philippines
- Formosa Plastics Group - Taiwan
- ASAPP Information Group - India
- Electricity Generating Authority of Thailand
- Parliament of New Zealand
- PetroVietnam Power Coal Import and Supply Company
- Tata Chemicals Ltd - India
- Agrawal Coal Company - India
- Parry Sugars Refinery, India
- Orica Australia Pty. Ltd.
- CIMB Investment Bank - Malaysia
- Latin American Coal - Colombia
- Sical Logistics Limited - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Neyveli Lignite Corporation Ltd, - India
- Salva Resources Pvt Ltd - India
- Manunggal Multi Energi - Indonesia
- Energy Development Corp, Philippines
- Malabar Cements Ltd - India
- Straits Asia Resources Limited - Singapore
- Vizag Seaport Private Limited - India
- Alfred C Toepfer International GmbH - Germany
- Orica Mining Services - Indonesia
- Renaissance Capital - South Africa
- Mintek Dendrill Indonesia
- Wilmar Investment Holdings
- Kobexindo Tractors - Indoneisa
- Wood Mackenzie - Singapore
- New Zealand Coal & Carbon
- Ministry of Finance - Indonesia
- VISA Power Limited - India
- Antam Resourcindo - Indonesia
- South Luzon Thermal Energy Corporation
- Madhucon Powers Ltd - India
- Indian Energy Exchange, India
- Ministry of Mines - Canada
- Bukit Asam (Persero) Tbk - Indonesia
- Rio Tinto Coal - Australia
- Makarim & Taira - Indonesia
- Kohat Cement Company Ltd. - Pakistan
- Port Waratah Coal Services - Australia
- Global Coal Blending Company Limited - Australia
- Anglo American - United Kingdom
- Interocean Group of Companies - India
- Lanco Infratech Ltd - India
- Star Paper Mills Limited - India
- SN Aboitiz Power Inc, Philippines
- Toyota Tsusho Corporation, Japan
- GN Power Mariveles Coal Plant, Philippines
- Essar Steel Hazira Ltd - India
- Global Green Power PLC Corporation, Philippines
- Independent Power Producers Association of India
- Iligan Light & Power Inc, Philippines
- Goldman Sachs - Singapore
- Medco Energi Mining Internasional
- Sojitz Corporation - Japan
- Heidelberg Cement - Germany
- Ministry of Transport, Egypt
- Petron Corporation, Philippines
- Minerals Council of Australia
- Vedanta Resources Plc - India
- ICICI Bank Limited - India
- Therma Luzon, Inc, Philippines
- Global Business Power Corporation, Philippines
- Riau Bara Harum - Indonesia
- Miang Besar Coal Terminal - Indonesia
- Thai Mozambique Logistica
- Sinarmas Energy and Mining - Indonesia
- Power Finance Corporation Ltd., India
- Simpson Spence & Young - Indonesia
- The University of Queensland
- Metalloyd Limited - United Kingdom
- PTC India Limited - India
- TNB Fuel Sdn Bhd - Malaysia
- SMC Global Power, Philippines
- MS Steel International - UAE
- Asia Pacific Energy Resources Ventures Inc, Philippines
- The State Trading Corporation of India Ltd
- Central Electricity Authority - India
- Deloitte Consulting - India
- Samtan Co., Ltd - South Korea
- IHS Mccloskey Coal Group - USA
- Kumho Petrochemical, South Korea
- Marubeni Corporation - India
- Bharathi Cement Corporation - India
- Edison Trading Spa - Italy
- Thiess Contractors Indonesia
- Jindal Steel & Power Ltd - India
- Indonesian Coal Mining Association
- Directorate Of Revenue Intelligence - India
- Binh Thuan Hamico - Vietnam
- Siam City Cement - Thailand
- Semirara Mining Corp, Philippines
- Dalmia Cement Bharat India
- Commonwealth Bank - Australia
- Coal and Oil Company - UAE
- Coastal Gujarat Power Limited - India
- Billiton Holdings Pty Ltd - Australia
- European Bulk Services B.V. - Netherlands
- Electricity Authority, New Zealand
- Pipit Mutiara Jaya. PT, Indonesia
- SMG Consultants - Indonesia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Sakthi Sugars Limited - India
- Australian Commodity Traders Exchange
- Carbofer General Trading SA - India
- Indogreen Group - Indonesia
- Larsen & Toubro Limited - India
- TeaM Sual Corporation - Philippines
- Eastern Coal Council - USA
- Mercuria Energy - Indonesia
- Asmin Koalindo Tuhup - Indonesia
- Baramulti Group, Indonesia
- Altura Mining Limited, Indonesia
- Xindia Steels Limited - India
- London Commodity Brokers - England
- Grasim Industreis Ltd - India
- Intertek Mineral Services - Indonesia
- Gujarat Electricity Regulatory Commission - India
- Bukit Makmur.PT - Indonesia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- McConnell Dowell - Australia
- Africa Commodities Group - South Africa
- White Energy Company Limited
- Mjunction Services Limited - India
- Aboitiz Power Corporation - Philippines
- Barasentosa Lestari - Indonesia
- Merrill Lynch Commodities Europe
- Aditya Birla Group - India
- Eastern Energy - Thailand
- Cement Manufacturers Association - India
- Rashtriya Ispat Nigam Limited - India
- CNBM International Corporation - China
- Leighton Contractors Pty Ltd - Australia
- Kartika Selabumi Mining - Indonesia
- Maharashtra Electricity Regulatory Commission - India
- Jorong Barutama Greston.PT - Indonesia
- Tamil Nadu electricity Board
- Chettinad Cement Corporation Ltd - India
- Videocon Industries ltd - India
- Planning Commission, India
- OPG Power Generation Pvt Ltd - India
- Vijayanagar Sugar Pvt Ltd - India
- IEA Clean Coal Centre - UK
- Jaiprakash Power Ventures ltd
- Mercator Lines Limited - India
- International Coal Ventures Pvt Ltd - India
- Bayan Resources Tbk. - Indonesia
- Singapore Mercantile Exchange
- Karaikal Port Pvt Ltd - India
- Petrochimia International Co. Ltd.- Taiwan
- Economic Council, Georgia
- Bhushan Steel Limited - India
- Borneo Indobara - Indonesia
- Sindya Power Generating Company Private Ltd
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Bukit Baiduri Energy - Indonesia
- Oldendorff Carriers - Singapore
- Bhoruka Overseas - Indonesia
- Banpu Public Company Limited - Thailand
- Ambuja Cements Ltd - India
- India Bulls Power Limited - India
- Savvy Resources Ltd - HongKong
- Ind-Barath Power Infra Limited - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Siam City Cement PLC, Thailand
- Cigading International Bulk Terminal - Indonesia
- San Jose City I Power Corp, Philippines
- Attock Cement Pakistan Limited
- Directorate General of MIneral and Coal - Indonesia
- GVK Power & Infra Limited - India
- Kalimantan Lumbung Energi - Indonesia
- LBH Netherlands Bv - Netherlands
- The Treasury - Australian Government
- Semirara Mining and Power Corporation, Philippines
- Pendopo Energi Batubara - Indonesia
- Kapuas Tunggal Persada - Indonesia
- Kaltim Prima Coal - Indonesia
- Energy Link Ltd, New Zealand
- Krishnapatnam Port Company Ltd. - India
- Posco Energy - South Korea
- AsiaOL BioFuels Corp., Philippines
- Gujarat Sidhee Cement - India
- Ceylon Electricity Board - Sri Lanka
- Central Java Power - Indonesia
- Bangladesh Power Developement Board
- Trasteel International SA, Italy
- Gujarat Mineral Development Corp Ltd - India
- Coalindo Energy - Indonesia
- Indo Tambangraya Megah - Indonesia
- Timah Investasi Mineral - Indoneisa
- Kepco SPC Power Corporation, Philippines
- Indian Oil Corporation Limited
- Indika Energy - Indonesia
- Bulk Trading Sa - Switzerland
- Australian Coal Association
- Karbindo Abesyapradhi - Indoneisa
- GMR Energy Limited - India
- PowerSource Philippines DevCo
- Kideco Jaya Agung - Indonesia
- Sree Jayajothi Cements Limited - India
- Georgia Ports Authority, United States
- Meralco Power Generation, Philippines
- Chamber of Mines of South Africa
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