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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, 27 January 22
2022 - A YEAR OF REBALANCING FOR METALS AND MINING - WOOD MACKENZIE
If 2021 was the year of rebound for metals and mining (M&M) commodities, then 2022 is shaping as the year of rebalance, says Wood Mackenzie, a ...
Wednesday, 26 January 22
MARKET INSIGHT - INTERMODAL
While it is logical that most of the S&P reports of the first weeks of the year are linked to very limited activity as reflected in the weekly ...
Wednesday, 26 January 22
INDONESIA: DME PROJECT IS ECONOMICALLY VIABLE AS STUDY DEMONSTRATES
The government is encouraging downstream coal processing or increase in coal added value, for example by turning coal into Dimethyl Ether (DME) to ...
Wednesday, 26 January 22
COMMODITY PRICES COULD SOAR IF THE RUSSIA-UKRAINE CRISIS ESCALATES - ING
It appears that a number of commodity markets are starting to at least price in some geopolitical risk around the growing tension between Russia an ...
Wednesday, 26 January 22
INDONESIA'S COAL BAN SENDS PRICES SOARING, OTHER EXPORTERS FAIL TO STEP UP - REUTERS
Indonesia’s short-lived ban on exporting coal has sent ructions through the seaborne market for the fuel in Asia, with the fallout likely to ...
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- Offshore Bulk Terminal Pte Ltd, Singapore
- GVK Power & Infra Limited - India
- Aditya Birla Group - India
- Africa Commodities Group - South Africa
- Holcim Trading Pte Ltd - Singapore
- Ministry of Transport, Egypt
- Jorong Barutama Greston.PT - Indonesia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- The University of Queensland
- Maharashtra Electricity Regulatory Commission - India
- OPG Power Generation Pvt Ltd - India
- The State Trading Corporation of India Ltd
- Attock Cement Pakistan Limited
- Agrawal Coal Company - India
- Kapuas Tunggal Persada - Indonesia
- Baramulti Group, Indonesia
- Meenaskhi Energy Private Limited - India
- Ministry of Mines - Canada
- Indika Energy - Indonesia
- Lanco Infratech Ltd - India
- Global Green Power PLC Corporation, Philippines
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Kohat Cement Company Ltd. - Pakistan
- Mercuria Energy - Indonesia
- Rashtriya Ispat Nigam Limited - India
- PowerSource Philippines DevCo
- Ceylon Electricity Board - Sri Lanka
- Bukit Baiduri Energy - Indonesia
- Trasteel International SA, Italy
- Savvy Resources Ltd - HongKong
- Salva Resources Pvt Ltd - India
- Antam Resourcindo - Indonesia
- Timah Investasi Mineral - Indoneisa
- Parry Sugars Refinery, India
- Parliament of New Zealand
- Star Paper Mills Limited - India
- The Treasury - Australian Government
- Intertek Mineral Services - Indonesia
- London Commodity Brokers - England
- Sojitz Corporation - Japan
- Siam City Cement PLC, Thailand
- Semirara Mining and Power Corporation, Philippines
- Medco Energi Mining Internasional
- Indonesian Coal Mining Association
- Ministry of Finance - Indonesia
- Carbofer General Trading SA - India
- Semirara Mining Corp, Philippines
- Coal and Oil Company - UAE
- Makarim & Taira - Indonesia
- Manunggal Multi Energi - Indonesia
- Jaiprakash Power Ventures ltd
- Gujarat Electricity Regulatory Commission - India
- CIMB Investment Bank - Malaysia
- Minerals Council of Australia
- Marubeni Corporation - India
- Vijayanagar Sugar Pvt Ltd - India
- South Luzon Thermal Energy Corporation
- Xindia Steels Limited - India
- Independent Power Producers Association of India
- Heidelberg Cement - Germany
- Bangladesh Power Developement Board
- Kideco Jaya Agung - Indonesia
- Goldman Sachs - Singapore
- Banpu Public Company Limited - Thailand
- Ambuja Cements Ltd - India
- IHS Mccloskey Coal Group - USA
- Bank of Tokyo Mitsubishi UFJ Ltd
- Ind-Barath Power Infra Limited - India
- Therma Luzon, Inc, Philippines
- GMR Energy Limited - India
- Borneo Indobara - Indonesia
- Mercator Lines Limited - India
- Cigading International Bulk Terminal - Indonesia
- TNB Fuel Sdn Bhd - Malaysia
- PNOC Exploration Corporation - Philippines
- Samtan Co., Ltd - South Korea
- AsiaOL BioFuels Corp., Philippines
- Kartika Selabumi Mining - Indonesia
- Power Finance Corporation Ltd., India
- SMG Consultants - Indonesia
- Leighton Contractors Pty Ltd - Australia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Singapore Mercantile Exchange
- Pipit Mutiara Jaya. PT, Indonesia
- Indian Energy Exchange, India
- Alfred C Toepfer International GmbH - Germany
- Siam City Cement - Thailand
- Jindal Steel & Power Ltd - India
- Metalloyd Limited - United Kingdom
- Petron Corporation, Philippines
- Merrill Lynch Commodities Europe
- Sical Logistics Limited - India
- Kobexindo Tractors - Indoneisa
- Commonwealth Bank - Australia
- Thiess Contractors Indonesia
- Cement Manufacturers Association - India
- Globalindo Alam Lestari - Indonesia
- Sakthi Sugars Limited - India
- GN Power Mariveles Coal Plant, Philippines
- Billiton Holdings Pty Ltd - Australia
- Chamber of Mines of South Africa
- Orica Australia Pty. Ltd.
- Chettinad Cement Corporation Ltd - India
- Indo Tambangraya Megah - Indonesia
- Energy Development Corp, Philippines
- Sinarmas Energy and Mining - Indonesia
- Rio Tinto Coal - Australia
- Global Business Power Corporation, Philippines
- Bulk Trading Sa - Switzerland
- Latin American Coal - Colombia
- Bukit Makmur.PT - Indonesia
- Australian Commodity Traders Exchange
- Georgia Ports Authority, United States
- Krishnapatnam Port Company Ltd. - India
- Thai Mozambique Logistica
- Port Waratah Coal Services - Australia
- Posco Energy - South Korea
- Dalmia Cement Bharat India
- Central Java Power - Indonesia
- New Zealand Coal & Carbon
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Tamil Nadu electricity Board
- Larsen & Toubro Limited - India
- Romanian Commodities Exchange
- Bahari Cakrawala Sebuku - Indonesia
- Uttam Galva Steels Limited - India
- Oldendorff Carriers - Singapore
- International Coal Ventures Pvt Ltd - India
- Straits Asia Resources Limited - Singapore
- CNBM International Corporation - China
- Karaikal Port Pvt Ltd - India
- White Energy Company Limited
- Energy Link Ltd, New Zealand
- Deloitte Consulting - India
- LBH Netherlands Bv - Netherlands
- Petrochimia International Co. Ltd.- Taiwan
- India Bulls Power Limited - India
- MS Steel International - UAE
- Sree Jayajothi Cements Limited - India
- Indian Oil Corporation Limited
- Australian Coal Association
- Bhatia International Limited - India
- Essar Steel Hazira Ltd - India
- Gujarat Sidhee Cement - India
- Planning Commission, India
- SN Aboitiz Power Inc, Philippines
- Wilmar Investment Holdings
- Malabar Cements Ltd - India
- Toyota Tsusho Corporation, Japan
- Vizag Seaport Private Limited - India
- Sindya Power Generating Company Private Ltd
- Sarangani Energy Corporation, Philippines
- Bukit Asam (Persero) Tbk - Indonesia
- Vedanta Resources Plc - India
- Binh Thuan Hamico - Vietnam
- Price Waterhouse Coopers - Russia
- Edison Trading Spa - Italy
- Grasim Industreis Ltd - India
- Bhoruka Overseas - Indonesia
- Tata Chemicals Ltd - India
- Formosa Plastics Group - Taiwan
- Barasentosa Lestari - Indonesia
- Bhushan Steel Limited - India
- Global Coal Blending Company Limited - Australia
- Central Electricity Authority - India
- Standard Chartered Bank - UAE
- McConnell Dowell - Australia
- ASAPP Information Group - India
- Gujarat Mineral Development Corp Ltd - India
- Electricity Authority, New Zealand
- Aboitiz Power Corporation - Philippines
- Videocon Industries ltd - India
- Madhucon Powers Ltd - India
- PetroVietnam Power Coal Import and Supply Company
- European Bulk Services B.V. - Netherlands
- Eastern Coal Council - USA
- Economic Council, Georgia
- Coastal Gujarat Power Limited - India
- VISA Power Limited - India
- Interocean Group of Companies - India
- Kumho Petrochemical, South Korea
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Bayan Resources Tbk. - Indonesia
- Directorate Of Revenue Intelligence - India
- Wood Mackenzie - Singapore
- Neyveli Lignite Corporation Ltd, - India
- Eastern Energy - Thailand
- Riau Bara Harum - Indonesia
- Pendopo Energi Batubara - Indonesia
- Bharathi Cement Corporation - India
- Karbindo Abesyapradhi - Indoneisa
- Kalimantan Lumbung Energi - Indonesia
- Maheswari Brothers Coal Limited - India
- Indogreen Group - Indonesia
- San Jose City I Power Corp, Philippines
- Iligan Light & Power Inc, Philippines
- Directorate General of MIneral and Coal - Indonesia
- Mjunction Services Limited - India
- Renaissance Capital - South Africa
- Meralco Power Generation, Philippines
- Kepco SPC Power Corporation, Philippines
- SMC Global Power, Philippines
- Asmin Koalindo Tuhup - Indonesia
- Kaltim Prima Coal - Indonesia
- ICICI Bank Limited - India
- Mintek Dendrill Indonesia
- Electricity Generating Authority of Thailand
- PTC India Limited - India
- TeaM Sual Corporation - Philippines
- GAC Shipping (India) Pvt Ltd
- Simpson Spence & Young - Indonesia
- Anglo American - United Kingdom
- Orica Mining Services - Indonesia
- IEA Clean Coal Centre - UK
- Miang Besar Coal Terminal - Indonesia
- Altura Mining Limited, Indonesia
- Coalindo Energy - Indonesia
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