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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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Wednesday, 05 January 22
CHINA COAL FUTURES SURGE ON SUPPLY WORRIES AMID INDONESIA EXPORT BAN - REUTERS
China’s thermal coal futures surged by as much as 7.8per cent to kick off 2022 on concerns of supply disruptions after Indonesia, its biggest ...
Wednesday, 05 January 22
INDONESIA WARNS COAL SUPPLY CRUNCH NOT OVER AS CHINA PRICES RALLY - REUTERS
Indonesia has warned that its coal supply situation remains critical, ahead of Wednesday’s (Jan 5) review of its export ban, unnerving global ...
Tuesday, 28 December 21
INDIA'S ADANI NEARS FIRST COAL SHIPMENT FROM SHUNNED AUSTRALIAN MINE - REUTERS
India’s Adani Group ADEL.NS is preparing to ship the first coal cargo from Australia’s most controversial mine, after battling a seven- ...
Thursday, 23 December 21
COAL TO STAY AS MAJOR SOURCE OF ENERGY IN FORESEEABLE FUTURE: JOSHI - BUSINESS STANDARD
Coal will stay as a major source of energy in the foreseeable future as it is an affordable source of energy with substantial reserve, Parliament w ...
Thursday, 23 December 21
ANNUAL U.S. COAL-FIRED ELECTRICITY GENERATION WILL INCREASE FOR THE FIRST TIME SINCE 2014 - EIA
From December 20 through December 30, Today in Energy will feature some of our favorite articles from 2021. Today’s article was originally pu ...
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- Kepco SPC Power Corporation, Philippines
- Karaikal Port Pvt Ltd - India
- Miang Besar Coal Terminal - Indonesia
- Indian Oil Corporation Limited
- Lanco Infratech Ltd - India
- Siam City Cement - Thailand
- LBH Netherlands Bv - Netherlands
- Aboitiz Power Corporation - Philippines
- Georgia Ports Authority, United States
- ICICI Bank Limited - India
- Meenaskhi Energy Private Limited - India
- Jindal Steel & Power Ltd - India
- Electricity Authority, New Zealand
- Sical Logistics Limited - India
- Binh Thuan Hamico - Vietnam
- Kumho Petrochemical, South Korea
- Cigading International Bulk Terminal - Indonesia
- Central Java Power - Indonesia
- Electricity Generating Authority of Thailand
- Price Waterhouse Coopers - Russia
- Ind-Barath Power Infra Limited - India
- Energy Development Corp, Philippines
- Formosa Plastics Group - Taiwan
- Merrill Lynch Commodities Europe
- The University of Queensland
- Planning Commission, India
- Commonwealth Bank - Australia
- Timah Investasi Mineral - Indoneisa
- Indo Tambangraya Megah - Indonesia
- GVK Power & Infra Limited - India
- Altura Mining Limited, Indonesia
- Riau Bara Harum - Indonesia
- Kideco Jaya Agung - Indonesia
- Sojitz Corporation - Japan
- Cement Manufacturers Association - India
- Directorate General of MIneral and Coal - Indonesia
- Heidelberg Cement - Germany
- PNOC Exploration Corporation - Philippines
- Holcim Trading Pte Ltd - Singapore
- SMC Global Power, Philippines
- Interocean Group of Companies - India
- Anglo American - United Kingdom
- Pendopo Energi Batubara - Indonesia
- Petron Corporation, Philippines
- GMR Energy Limited - India
- Bayan Resources Tbk. - Indonesia
- Mercuria Energy - Indonesia
- Star Paper Mills Limited - India
- The State Trading Corporation of India Ltd
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Gujarat Electricity Regulatory Commission - India
- Oldendorff Carriers - Singapore
- Simpson Spence & Young - Indonesia
- Eastern Energy - Thailand
- Essar Steel Hazira Ltd - India
- Makarim & Taira - Indonesia
- Trasteel International SA, Italy
- Petrochimia International Co. Ltd.- Taiwan
- Bangladesh Power Developement Board
- Australian Commodity Traders Exchange
- PowerSource Philippines DevCo
- New Zealand Coal & Carbon
- Edison Trading Spa - Italy
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Bhatia International Limited - India
- Straits Asia Resources Limited - Singapore
- Kobexindo Tractors - Indoneisa
- Marubeni Corporation - India
- Malabar Cements Ltd - India
- MS Steel International - UAE
- Bharathi Cement Corporation - India
- Singapore Mercantile Exchange
- Kaltim Prima Coal - Indonesia
- Kalimantan Lumbung Energi - Indonesia
- Offshore Bulk Terminal Pte Ltd, Singapore
- Tamil Nadu electricity Board
- IHS Mccloskey Coal Group - USA
- Mercator Lines Limited - India
- PTC India Limited - India
- Energy Link Ltd, New Zealand
- Karbindo Abesyapradhi - Indoneisa
- Maharashtra Electricity Regulatory Commission - India
- Ministry of Transport, Egypt
- Mintek Dendrill Indonesia
- Minerals Council of Australia
- VISA Power Limited - India
- Kohat Cement Company Ltd. - Pakistan
- London Commodity Brokers - England
- TeaM Sual Corporation - Philippines
- Indonesian Coal Mining Association
- Manunggal Multi Energi - Indonesia
- Intertek Mineral Services - Indonesia
- Aditya Birla Group - India
- European Bulk Services B.V. - Netherlands
- Savvy Resources Ltd - HongKong
- Larsen & Toubro Limited - India
- Uttam Galva Steels Limited - India
- Videocon Industries ltd - India
- IEA Clean Coal Centre - UK
- Medco Energi Mining Internasional
- Therma Luzon, Inc, Philippines
- Carbofer General Trading SA - India
- Wilmar Investment Holdings
- Global Business Power Corporation, Philippines
- Iligan Light & Power Inc, Philippines
- Sindya Power Generating Company Private Ltd
- GN Power Mariveles Coal Plant, Philippines
- Bhoruka Overseas - Indonesia
- Bukit Makmur.PT - Indonesia
- Vizag Seaport Private Limited - India
- Ministry of Finance - Indonesia
- Gujarat Mineral Development Corp Ltd - India
- Semirara Mining Corp, Philippines
- Alfred C Toepfer International GmbH - Germany
- Chamber of Mines of South Africa
- PetroVietnam Power Coal Import and Supply Company
- Chettinad Cement Corporation Ltd - India
- Indian Energy Exchange, India
- South Luzon Thermal Energy Corporation
- Grasim Industreis Ltd - India
- Samtan Co., Ltd - South Korea
- Agrawal Coal Company - India
- Asmin Koalindo Tuhup - Indonesia
- Deloitte Consulting - India
- Coal and Oil Company - UAE
- Barasentosa Lestari - Indonesia
- The Treasury - Australian Government
- Indika Energy - Indonesia
- Metalloyd Limited - United Kingdom
- Kapuas Tunggal Persada - Indonesia
- India Bulls Power Limited - India
- Bhushan Steel Limited - India
- San Jose City I Power Corp, Philippines
- Sinarmas Energy and Mining - Indonesia
- Renaissance Capital - South Africa
- Pipit Mutiara Jaya. PT, Indonesia
- Eastern Coal Council - USA
- Bulk Trading Sa - Switzerland
- Kartika Selabumi Mining - Indonesia
- Bank of Tokyo Mitsubishi UFJ Ltd
- Rashtriya Ispat Nigam Limited - India
- Latin American Coal - Colombia
- Tata Chemicals Ltd - India
- Parry Sugars Refinery, India
- Romanian Commodities Exchange
- Coalindo Energy - Indonesia
- Central Electricity Authority - India
- Meralco Power Generation, Philippines
- Siam City Cement PLC, Thailand
- OPG Power Generation Pvt Ltd - India
- International Coal Ventures Pvt Ltd - India
- Borneo Indobara - Indonesia
- Semirara Mining and Power Corporation, Philippines
- Goldman Sachs - Singapore
- Mjunction Services Limited - India
- White Energy Company Limited
- Wood Mackenzie - Singapore
- Port Waratah Coal Services - Australia
- Sakthi Sugars Limited - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Thai Mozambique Logistica
- Salva Resources Pvt Ltd - India
- Xindia Steels Limited - India
- Orica Australia Pty. Ltd.
- Attock Cement Pakistan Limited
- Sree Jayajothi Cements Limited - India
- Globalindo Alam Lestari - Indonesia
- Global Green Power PLC Corporation, Philippines
- Ceylon Electricity Board - Sri Lanka
- Economic Council, Georgia
- Posco Energy - South Korea
- ASAPP Information Group - India
- Jaiprakash Power Ventures ltd
- Jorong Barutama Greston.PT - Indonesia
- Directorate Of Revenue Intelligence - India
- Sarangani Energy Corporation, Philippines
- TNB Fuel Sdn Bhd - Malaysia
- Independent Power Producers Association of India
- Ambuja Cements Ltd - India
- GAC Shipping (India) Pvt Ltd
- Banpu Public Company Limited - Thailand
- Indogreen Group - Indonesia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Ministry of Mines - Canada
- Vijayanagar Sugar Pvt Ltd - India
- Leighton Contractors Pty Ltd - Australia
- Orica Mining Services - Indonesia
- CNBM International Corporation - China
- AsiaOL BioFuels Corp., Philippines
- Madhucon Powers Ltd - India
- Rio Tinto Coal - Australia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- CIMB Investment Bank - Malaysia
- Krishnapatnam Port Company Ltd. - India
- Bahari Cakrawala Sebuku - Indonesia
- Bukit Baiduri Energy - Indonesia
- Parliament of New Zealand
- Global Coal Blending Company Limited - Australia
- Gujarat Sidhee Cement - India
- McConnell Dowell - Australia
- Africa Commodities Group - South Africa
- Standard Chartered Bank - UAE
- Vedanta Resources Plc - India
- Billiton Holdings Pty Ltd - Australia
- Australian Coal Association
- Thiess Contractors Indonesia
- Coastal Gujarat Power Limited - India
- Baramulti Group, Indonesia
- Power Finance Corporation Ltd., India
- SMG Consultants - Indonesia
- Maheswari Brothers Coal Limited - India
- Toyota Tsusho Corporation, Japan
- Neyveli Lignite Corporation Ltd, - India
- Antam Resourcindo - Indonesia
- Dalmia Cement Bharat India
- Bukit Asam (Persero) Tbk - Indonesia
- SN Aboitiz Power Inc, Philippines
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