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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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Friday, 29 July 22
GLENCORE TO SUPPLY COAL TO NIPPON STEEL AT $375 PER TON - BLOOMBERG
Glencore Plc, agreed to supply coal to Nippon Steel at one of the highest prices ever paid by the Japan Bloomberg reported on July 27.
...
Friday, 29 July 22
GLOBAL COAL DEMAND IS SET TO RETURN TO ITS ALL-TIME HIGH IN 2022 - IEA
The world’s consumption of coal is set to rise slightly in 2022, taking it back to the record level it reached nearly a decade ago, according ...
Thursday, 28 July 22
CREW FAMILIARISATION IS CRITICAL WHEN TAKING OVER A VESSEL - WEST P&I CLUB
Knowledge to Elevate
When a vessel changes ownership and/or manager, it can take some considerable time before the new crew and mana ...
Thursday, 28 July 22
RETURN OF COAL A THREAT TO EUROPEAN COMPANIES' ESG RATINGS - REUTERS
European companies turning to coal as an alternative to Russian gas face a hit to their environmental, social and governance ratings, leaving them ...
Wednesday, 27 July 22
MARKET INSIGHT - INTERMODAL
Amid the upcoming ban on Russian coal from the EU, which will be in full effect on August 10th, EU nations have been accelerating their coal import ...
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- Globalindo Alam Lestari - Indonesia
- IEA Clean Coal Centre - UK
- Lanco Infratech Ltd - India
- Indo Tambangraya Megah - Indonesia
- SMC Global Power, Philippines
- Bhatia International Limited - India
- Bayan Resources Tbk. - Indonesia
- Neyveli Lignite Corporation Ltd, - India
- International Coal Ventures Pvt Ltd - India
- White Energy Company Limited
- Directorate Of Revenue Intelligence - India
- Oldendorff Carriers - Singapore
- Bangladesh Power Developement Board
- Essar Steel Hazira Ltd - India
- Ministry of Finance - Indonesia
- Medco Energi Mining Internasional
- Timah Investasi Mineral - Indoneisa
- Metalloyd Limited - United Kingdom
- Sarangani Energy Corporation, Philippines
- Power Finance Corporation Ltd., India
- Chamber of Mines of South Africa
- Malabar Cements Ltd - India
- Straits Asia Resources Limited - Singapore
- Central Java Power - Indonesia
- Bahari Cakrawala Sebuku - Indonesia
- Sojitz Corporation - Japan
- Altura Mining Limited, Indonesia
- Standard Chartered Bank - UAE
- Vizag Seaport Private Limited - India
- Samtan Co., Ltd - South Korea
- Maheswari Brothers Coal Limited - India
- Cigading International Bulk Terminal - Indonesia
- Romanian Commodities Exchange
- Parliament of New Zealand
- Orica Australia Pty. Ltd.
- Ceylon Electricity Board - Sri Lanka
- SMG Consultants - Indonesia
- Australian Coal Association
- Aditya Birla Group - India
- Mercator Lines Limited - India
- Wilmar Investment Holdings
- Meralco Power Generation, Philippines
- Bukit Makmur.PT - Indonesia
- Sree Jayajothi Cements Limited - India
- Barasentosa Lestari - Indonesia
- Electricity Authority, New Zealand
- The State Trading Corporation of India Ltd
- Energy Development Corp, Philippines
- Therma Luzon, Inc, Philippines
- Rio Tinto Coal - Australia
- Jindal Steel & Power Ltd - India
- Simpson Spence & Young - Indonesia
- Ind-Barath Power Infra Limited - India
- Georgia Ports Authority, United States
- Heidelberg Cement - Germany
- Karaikal Port Pvt Ltd - India
- Madhucon Powers Ltd - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Miang Besar Coal Terminal - Indonesia
- Antam Resourcindo - Indonesia
- Karbindo Abesyapradhi - Indoneisa
- South Luzon Thermal Energy Corporation
- Krishnapatnam Port Company Ltd. - India
- Latin American Coal - Colombia
- Riau Bara Harum - Indonesia
- Star Paper Mills Limited - India
- Interocean Group of Companies - India
- Banpu Public Company Limited - Thailand
- Petron Corporation, Philippines
- Kepco SPC Power Corporation, Philippines
- Indian Oil Corporation Limited
- Kapuas Tunggal Persada - Indonesia
- SN Aboitiz Power Inc, Philippines
- Goldman Sachs - Singapore
- Coal and Oil Company - UAE
- TeaM Sual Corporation - Philippines
- PTC India Limited - India
- Meenaskhi Energy Private Limited - India
- Directorate General of MIneral and Coal - Indonesia
- Bhushan Steel Limited - India
- Uttam Galva Steels Limited - India
- GVK Power & Infra Limited - India
- Iligan Light & Power Inc, Philippines
- Kideco Jaya Agung - Indonesia
- Ambuja Cements Ltd - India
- Merrill Lynch Commodities Europe
- Gujarat Electricity Regulatory Commission - India
- Pendopo Energi Batubara - Indonesia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Pipit Mutiara Jaya. PT, Indonesia
- Commonwealth Bank - Australia
- MS Steel International - UAE
- Intertek Mineral Services - Indonesia
- Eastern Energy - Thailand
- Edison Trading Spa - Italy
- Australian Commodity Traders Exchange
- Kohat Cement Company Ltd. - Pakistan
- Port Waratah Coal Services - Australia
- ICICI Bank Limited - India
- Formosa Plastics Group - Taiwan
- Ministry of Transport, Egypt
- Toyota Tsusho Corporation, Japan
- Videocon Industries ltd - India
- San Jose City I Power Corp, Philippines
- Billiton Holdings Pty Ltd - Australia
- Agrawal Coal Company - India
- Coalindo Energy - Indonesia
- Anglo American - United Kingdom
- Tata Chemicals Ltd - India
- Aboitiz Power Corporation - Philippines
- Kobexindo Tractors - Indoneisa
- Global Business Power Corporation, Philippines
- VISA Power Limited - India
- Mjunction Services Limited - India
- Maharashtra Electricity Regulatory Commission - India
- PetroVietnam Power Coal Import and Supply Company
- Kumho Petrochemical, South Korea
- Grasim Industreis Ltd - India
- Price Waterhouse Coopers - Russia
- Larsen & Toubro Limited - India
- Semirara Mining and Power Corporation, Philippines
- Xindia Steels Limited - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- IHS Mccloskey Coal Group - USA
- GAC Shipping (India) Pvt Ltd
- Siam City Cement - Thailand
- Energy Link Ltd, New Zealand
- New Zealand Coal & Carbon
- Leighton Contractors Pty Ltd - Australia
- Baramulti Group, Indonesia
- Mercuria Energy - Indonesia
- India Bulls Power Limited - India
- Planning Commission, India
- Gujarat Sidhee Cement - India
- PowerSource Philippines DevCo
- GN Power Mariveles Coal Plant, Philippines
- Savvy Resources Ltd - HongKong
- Minerals Council of Australia
- Deloitte Consulting - India
- Electricity Generating Authority of Thailand
- Semirara Mining Corp, Philippines
- Ministry of Mines - Canada
- TNB Fuel Sdn Bhd - Malaysia
- Gujarat Mineral Development Corp Ltd - India
- LBH Netherlands Bv - Netherlands
- Borneo Indobara - Indonesia
- Sindya Power Generating Company Private Ltd
- Asmin Koalindo Tuhup - Indonesia
- ASAPP Information Group - India
- Parry Sugars Refinery, India
- McConnell Dowell - Australia
- Siam City Cement PLC, Thailand
- OPG Power Generation Pvt Ltd - India
- Jaiprakash Power Ventures ltd
- Kartika Selabumi Mining - Indonesia
- Attock Cement Pakistan Limited
- Sakthi Sugars Limited - India
- The Treasury - Australian Government
- Indika Energy - Indonesia
- Global Green Power PLC Corporation, Philippines
- Makarim & Taira - Indonesia
- Bank of Tokyo Mitsubishi UFJ Ltd
- Alfred C Toepfer International GmbH - Germany
- Salva Resources Pvt Ltd - India
- Vijayanagar Sugar Pvt Ltd - India
- GMR Energy Limited - India
- Bharathi Cement Corporation - India
- Indian Energy Exchange, India
- European Bulk Services B.V. - Netherlands
- Renaissance Capital - South Africa
- Economic Council, Georgia
- Indonesian Coal Mining Association
- Trasteel International SA, Italy
- Cement Manufacturers Association - India
- Kaltim Prima Coal - Indonesia
- CNBM International Corporation - China
- Indogreen Group - Indonesia
- Holcim Trading Pte Ltd - Singapore
- Bukit Asam (Persero) Tbk - Indonesia
- Tamil Nadu electricity Board
- Sinarmas Energy and Mining - Indonesia
- Offshore Bulk Terminal Pte Ltd, Singapore
- Carbofer General Trading SA - India
- Posco Energy - South Korea
- Bukit Baiduri Energy - Indonesia
- PNOC Exploration Corporation - Philippines
- Binh Thuan Hamico - Vietnam
- Bhoruka Overseas - Indonesia
- Eastern Coal Council - USA
- Kalimantan Lumbung Energi - Indonesia
- Mintek Dendrill Indonesia
- Bulk Trading Sa - Switzerland
- Wood Mackenzie - Singapore
- Jorong Barutama Greston.PT - Indonesia
- Chettinad Cement Corporation Ltd - India
- Central Electricity Authority - India
- Vedanta Resources Plc - India
- Global Coal Blending Company Limited - Australia
- The University of Queensland
- AsiaOL BioFuels Corp., Philippines
- Manunggal Multi Energi - Indonesia
- Thiess Contractors Indonesia
- Independent Power Producers Association of India
- London Commodity Brokers - England
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Orica Mining Services - Indonesia
- Marubeni Corporation - India
- Thai Mozambique Logistica
- Dalmia Cement Bharat India
- Singapore Mercantile Exchange
- Sical Logistics Limited - India
- Coastal Gujarat Power Limited - India
- Africa Commodities Group - South Africa
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- CIMB Investment Bank - Malaysia
- Rashtriya Ispat Nigam Limited - India
- Petrochimia International Co. Ltd.- Taiwan
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