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