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