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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, 25 November 21
SE ASIA POWER DEMAND TO RISE AS STATE SUPPORT MITIGATES COVID-19 IMPACT - FITCH RATINGS
Electricity demand in south-east Asia is likely to increase in 2021, following slow growth or contraction in 2020, thanks to state support that has ...
Thursday, 25 November 21
FITCH RATINGS INCREASES MOST GLOBAL METALS AND MINING PRICE ASSUMPTIONS - FITCH RATINGS
Fitch Ratings has increased most metals and mining price assumptions, particularly those that benefit from increased longer-term demand due to glob ...
Thursday, 25 November 21
CHINA'S COAL PRICE DROPS IN MID-NOVEMBER AMID GOVERNMENT’S SWEEPING MEASURES - GLOBAL TIMES
China’s coal prices have dropped significantly in mid-November compared with the beginning of the month, with the price of coking coal and co ...
Wednesday, 24 November 21
MARKET INSIGHT - INTERMODAL
Inflation is the word that has dominated the meetings of foreign leaders and finance ministers in recent weeks, as rising energy costs, supply chai ...
Wednesday, 24 November 21
WHY THIS MINING ANALYST IS UPBEAT ON THE IRON ORE PRICE FORECAST - MOTLEY FOOL
In many ways, 2021 can be called the year of the iron ore price. Much of the talk of the ASX town this year has revolved around this key economic m ...
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- Sojitz Corporation - Japan
- Indo Tambangraya Megah - Indonesia
- PetroVietnam Power Coal Import and Supply Company
- Ministry of Finance - Indonesia
- San Jose City I Power Corp, Philippines
- Krishnapatnam Port Company Ltd. - India
- Global Business Power Corporation, Philippines
- Salva Resources Pvt Ltd - India
- Tata Chemicals Ltd - India
- Kaltim Prima Coal - Indonesia
- South Luzon Thermal Energy Corporation
- Barasentosa Lestari - Indonesia
- Meralco Power Generation, Philippines
- GN Power Mariveles Coal Plant, Philippines
- Simpson Spence & Young - Indonesia
- Sinarmas Energy and Mining - Indonesia
- Straits Asia Resources Limited - Singapore
- Holcim Trading Pte Ltd - Singapore
- Ministry of Transport, Egypt
- Madhucon Powers Ltd - India
- Bayan Resources Tbk. - Indonesia
- Gujarat Sidhee Cement - India
- Electricity Generating Authority of Thailand
- Parry Sugars Refinery, India
- Directorate General of MIneral and Coal - Indonesia
- Agrawal Coal Company - India
- Minerals Council of Australia
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- Chettinad Cement Corporation Ltd - India
- Central Java Power - Indonesia
- Georgia Ports Authority, United States
- Aboitiz Power Corporation - Philippines
- Semirara Mining and Power Corporation, Philippines
- Bhoruka Overseas - Indonesia
- Mercator Lines Limited - India
- CIMB Investment Bank - Malaysia
- Intertek Mineral Services - Indonesia
- Directorate Of Revenue Intelligence - India
- Medco Energi Mining Internasional
- Coastal Gujarat Power Limited - India
- PowerSource Philippines DevCo
- The University of Queensland
- Vijayanagar Sugar Pvt Ltd - India
- Indika Energy - Indonesia
- Attock Cement Pakistan Limited
- Anglo American - United Kingdom
- Wilmar Investment Holdings
- Siam City Cement - Thailand
- SMG Consultants - Indonesia
- Manunggal Multi Energi - Indonesia
- Mintek Dendrill Indonesia
- Miang Besar Coal Terminal - Indonesia
- The Treasury - Australian Government
- India Bulls Power Limited - India
- Africa Commodities Group - South Africa
- Orica Australia Pty. Ltd.
- Pipit Mutiara Jaya. PT, Indonesia
- Mercuria Energy - Indonesia
- Australian Coal Association
- LBH Netherlands Bv - Netherlands
- Rio Tinto Coal - Australia
- Alfred C Toepfer International GmbH - Germany
- Orica Mining Services - Indonesia
- Economic Council, Georgia
- Kohat Cement Company Ltd. - Pakistan
- Coal and Oil Company - UAE
- Bank of Tokyo Mitsubishi UFJ Ltd
- London Commodity Brokers - England
- Cigading International Bulk Terminal - Indonesia
- Standard Chartered Bank - UAE
- McConnell Dowell - Australia
- MS Steel International - UAE
- Samtan Co., Ltd - South Korea
- Sical Logistics Limited - India
- Banpu Public Company Limited - Thailand
- PNOC Exploration Corporation - Philippines
- Mjunction Services Limited - India
- Baramulti Group, Indonesia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Aditya Birla Group - India
- Vizag Seaport Private Limited - India
- Therma Luzon, Inc, Philippines
- Makarim & Taira - Indonesia
- ASAPP Information Group - India
- Asmin Koalindo Tuhup - Indonesia
- European Bulk Services B.V. - Netherlands
- Electricity Authority, New Zealand
- Gujarat Electricity Regulatory Commission - India
- Port Waratah Coal Services - Australia
- Siam City Cement PLC, Thailand
- Jindal Steel & Power Ltd - India
- Ind-Barath Power Infra Limited - India
- Global Green Power PLC Corporation, Philippines
- Kobexindo Tractors - Indoneisa
- Semirara Mining Corp, Philippines
- Latin American Coal - Colombia
- Bangladesh Power Developement Board
- Karbindo Abesyapradhi - Indoneisa
- SN Aboitiz Power Inc, Philippines
- Sindya Power Generating Company Private Ltd
- Malabar Cements Ltd - India
- Kalimantan Lumbung Energi - Indonesia
- Essar Steel Hazira Ltd - India
- Ministry of Mines - Canada
- Dalmia Cement Bharat India
- GVK Power & Infra Limited - India
- Maheswari Brothers Coal Limited - India
- Cement Manufacturers Association - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Lanco Infratech Ltd - India
- Vedanta Resources Plc - India
- Riau Bara Harum - Indonesia
- Heidelberg Cement - Germany
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Bukit Baiduri Energy - Indonesia
- Singapore Mercantile Exchange
- Parliament of New Zealand
- Xindia Steels Limited - India
- Larsen & Toubro Limited - India
- Kepco SPC Power Corporation, Philippines
- Meenaskhi Energy Private Limited - India
- Borneo Indobara - Indonesia
- Timah Investasi Mineral - Indoneisa
- Ceylon Electricity Board - Sri Lanka
- Bahari Cakrawala Sebuku - Indonesia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Altura Mining Limited, Indonesia
- Gujarat Mineral Development Corp Ltd - India
- New Zealand Coal & Carbon
- Star Paper Mills Limited - India
- Leighton Contractors Pty Ltd - Australia
- AsiaOL BioFuels Corp., Philippines
- Grasim Industreis Ltd - India
- Petrochimia International Co. Ltd.- Taiwan
- Uttam Galva Steels Limited - India
- Bhushan Steel Limited - India
- Posco Energy - South Korea
- ICICI Bank Limited - India
- Billiton Holdings Pty Ltd - Australia
- Sakthi Sugars Limited - India
- Energy Development Corp, Philippines
- Edison Trading Spa - Italy
- Videocon Industries ltd - India
- White Energy Company Limited
- Deloitte Consulting - India
- GMR Energy Limited - India
- Formosa Plastics Group - Taiwan
- Eastern Energy - Thailand
- Central Electricity Authority - India
- Bhatia International Limited - India
- Metalloyd Limited - United Kingdom
- GAC Shipping (India) Pvt Ltd
- The State Trading Corporation of India Ltd
- Offshore Bulk Terminal Pte Ltd, Singapore
- Maharashtra Electricity Regulatory Commission - India
- Kumho Petrochemical, South Korea
- Karaikal Port Pvt Ltd - India
- Chamber of Mines of South Africa
- Carbofer General Trading SA - India
- Rashtriya Ispat Nigam Limited - India
- PTC India Limited - India
- Globalindo Alam Lestari - Indonesia
- Kapuas Tunggal Persada - Indonesia
- CNBM International Corporation - China
- Bukit Makmur.PT - Indonesia
- Pendopo Energi Batubara - Indonesia
- Commonwealth Bank - Australia
- Neyveli Lignite Corporation Ltd, - India
- Romanian Commodities Exchange
- Bharathi Cement Corporation - India
- Interocean Group of Companies - India
- Renaissance Capital - South Africa
- Merrill Lynch Commodities Europe
- Energy Link Ltd, New Zealand
- Global Coal Blending Company Limited - Australia
- Marubeni Corporation - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Australian Commodity Traders Exchange
- Goldman Sachs - Singapore
- Jorong Barutama Greston.PT - Indonesia
- Binh Thuan Hamico - Vietnam
- Oldendorff Carriers - Singapore
- Jaiprakash Power Ventures ltd
- Indonesian Coal Mining Association
- Indogreen Group - Indonesia
- Ambuja Cements Ltd - India
- Bulk Trading Sa - Switzerland
- Indian Oil Corporation Limited
- Power Finance Corporation Ltd., India
- Toyota Tsusho Corporation, Japan
- Savvy Resources Ltd - HongKong
- Independent Power Producers Association of India
- TeaM Sual Corporation - Philippines
- VISA Power Limited - India
- Sree Jayajothi Cements Limited - India
- Sarangani Energy Corporation, Philippines
- Antam Resourcindo - Indonesia
- Indian Energy Exchange, India
- Iligan Light & Power Inc, Philippines
- Trasteel International SA, Italy
- Wood Mackenzie - Singapore
- Coalindo Energy - Indonesia
- Bukit Asam (Persero) Tbk - Indonesia
- Eastern Coal Council - USA
- Thiess Contractors Indonesia
- IEA Clean Coal Centre - UK
- International Coal Ventures Pvt Ltd - India
- Kartika Selabumi Mining - Indonesia
- Thai Mozambique Logistica
- IHS Mccloskey Coal Group - USA
- Tamil Nadu electricity Board
- OPG Power Generation Pvt Ltd - India
- SMC Global Power, Philippines
- Planning Commission, India
- TNB Fuel Sdn Bhd - Malaysia
- Petron Corporation, Philippines
- Price Waterhouse Coopers - Russia
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