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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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Tuesday, 19 July 22
DRY BULK MARKET: CAPESIZE MARKET FIRMS THIS WEEK - BALTIC EXCHANGE
Capesize
Firmer sentiment across both basins pushed the Capesize 5TC route average above the $20,000 threshold this week, closing at $24,209. A ...
Tuesday, 19 July 22
WHY SHIPPING MIGHT BE ABOUT TO GET A LITTLE BIT SLOWER - WORLD ECONOMIC FORUM
If shipping is the beating heart of global trade, its pulse is about to get slower.
Faced with uncertainty about which fuels to use in the long ...
Tuesday, 19 July 22
GERMANY'S INCREASED COAL, OIL USE WILL BE TEMPORARY, SCHOLZ SAYS - CNBC
Chancellor Olaf Scholz says Germany’s decision to reactivate coal and oil-fired power plants to relieve energy shortages because of the war i ...
Tuesday, 19 July 22
INDONESIA REMOVES PALM OIL EXPORT LEVY UNTIL AUG. 31 - REUTERS
Indonesia has scrapped its export levy for all palm oil products until Aug. 31 in a fresh attempt to boost exports and ease high inventories, finan ...
Tuesday, 19 July 22
CHINA'S JUNE DAILY COAL OUTPUT JUMPS ON PEAK SUMMER DEMAND - REUTERS
China’s daily coal output in June rose 6.6 per cent from a month earlier as miners cranked up output ahead of peak summer temperatures, when ...
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- IHS Mccloskey Coal Group - USA
- Neyveli Lignite Corporation Ltd, - India
- Ceylon Electricity Board - Sri Lanka
- Trasteel International SA, Italy
- Australian Commodity Traders Exchange
- Formosa Plastics Group - Taiwan
- Barasentosa Lestari - Indonesia
- Directorate General of MIneral and Coal - Indonesia
- PetroVietnam Power Coal Import and Supply Company
- TNB Fuel Sdn Bhd - Malaysia
- Gujarat Electricity Regulatory Commission - India
- Mintek Dendrill Indonesia
- International Coal Ventures Pvt Ltd - India
- Energy Link Ltd, New Zealand
- Eastern Coal Council - USA
- Kumho Petrochemical, South Korea
- Malabar Cements Ltd - India
- Maheswari Brothers Coal Limited - India
- Bhushan Steel Limited - India
- Alfred C Toepfer International GmbH - Germany
- The University of Queensland
- The Treasury - Australian Government
- Eastern Energy - Thailand
- GAC Shipping (India) Pvt Ltd
- McConnell Dowell - Australia
- Kideco Jaya Agung - Indonesia
- Antam Resourcindo - Indonesia
- Siam City Cement - Thailand
- Metalloyd Limited - United Kingdom
- Romanian Commodities Exchange
- Attock Cement Pakistan Limited
- Grasim Industreis Ltd - India
- Port Waratah Coal Services - Australia
- GMR Energy Limited - India
- India Bulls Power Limited - India
- Vizag Seaport Private Limited - India
- Madhucon Powers Ltd - India
- Kobexindo Tractors - Indoneisa
- Semirara Mining and Power Corporation, Philippines
- Coastal Gujarat Power Limited - India
- MS Steel International - UAE
- Bayan Resources Tbk. - Indonesia
- Chettinad Cement Corporation Ltd - India
- Parliament of New Zealand
- The State Trading Corporation of India Ltd
- Maharashtra Electricity Regulatory Commission - India
- Asmin Koalindo Tuhup - Indonesia
- PowerSource Philippines DevCo
- TeaM Sual Corporation - Philippines
- Aditya Birla Group - India
- Oldendorff Carriers - Singapore
- Indogreen Group - Indonesia
- Minerals Council of Australia
- Goldman Sachs - Singapore
- LBH Netherlands Bv - Netherlands
- Timah Investasi Mineral - Indoneisa
- Wood Mackenzie - Singapore
- Edison Trading Spa - Italy
- Interocean Group of Companies - India
- Kohat Cement Company Ltd. - Pakistan
- Binh Thuan Hamico - Vietnam
- Price Waterhouse Coopers - Russia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Kepco SPC Power Corporation, Philippines
- Cement Manufacturers Association - India
- Renaissance Capital - South Africa
- Agrawal Coal Company - India
- Mercuria Energy - Indonesia
- Meenaskhi Energy Private Limited - India
- Bulk Trading Sa - Switzerland
- Bhoruka Overseas - Indonesia
- Cigading International Bulk Terminal - Indonesia
- Global Business Power Corporation, Philippines
- San Jose City I Power Corp, Philippines
- Rio Tinto Coal - Australia
- Kapuas Tunggal Persada - Indonesia
- Leighton Contractors Pty Ltd - Australia
- Bank of Tokyo Mitsubishi UFJ Ltd
- Xindia Steels Limited - India
- Orica Australia Pty. Ltd.
- Simpson Spence & Young - Indonesia
- Gujarat Sidhee Cement - India
- Kalimantan Lumbung Energi - Indonesia
- Dalmia Cement Bharat India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Thiess Contractors Indonesia
- Jindal Steel & Power Ltd - India
- Star Paper Mills Limited - India
- Electricity Authority, New Zealand
- Billiton Holdings Pty Ltd - Australia
- Bharathi Cement Corporation - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Heidelberg Cement - Germany
- Tata Chemicals Ltd - India
- Mjunction Services Limited - India
- Aboitiz Power Corporation - Philippines
- Ministry of Transport, Egypt
- Central Electricity Authority - India
- Indika Energy - Indonesia
- Savvy Resources Ltd - HongKong
- Orica Mining Services - Indonesia
- GVK Power & Infra Limited - India
- Ministry of Finance - Indonesia
- PNOC Exploration Corporation - Philippines
- Pendopo Energi Batubara - Indonesia
- Krishnapatnam Port Company Ltd. - India
- Merrill Lynch Commodities Europe
- Straits Asia Resources Limited - Singapore
- Bhatia International Limited - India
- Indo Tambangraya Megah - Indonesia
- Sojitz Corporation - Japan
- Miang Besar Coal Terminal - Indonesia
- Uttam Galva Steels Limited - India
- Semirara Mining Corp, Philippines
- Karaikal Port Pvt Ltd - India
- Electricity Generating Authority of Thailand
- Latin American Coal - Colombia
- Holcim Trading Pte Ltd - Singapore
- SMC Global Power, Philippines
- Intertek Mineral Services - Indonesia
- Carbofer General Trading SA - India
- Deloitte Consulting - India
- Ministry of Mines - Canada
- Sarangani Energy Corporation, Philippines
- Indian Oil Corporation Limited
- South Luzon Thermal Energy Corporation
- Manunggal Multi Energi - Indonesia
- ICICI Bank Limited - India
- Africa Commodities Group - South Africa
- European Bulk Services B.V. - Netherlands
- Larsen & Toubro Limited - India
- Toyota Tsusho Corporation, Japan
- Sakthi Sugars Limited - India
- VISA Power Limited - India
- Directorate Of Revenue Intelligence - India
- Rashtriya Ispat Nigam Limited - India
- Videocon Industries ltd - India
- Riau Bara Harum - Indonesia
- GN Power Mariveles Coal Plant, Philippines
- AsiaOL BioFuels Corp., Philippines
- Siam City Cement PLC, Thailand
- Medco Energi Mining Internasional
- Ambuja Cements Ltd - India
- Mercator Lines Limited - India
- Makarim & Taira - Indonesia
- Banpu Public Company Limited - Thailand
- IEA Clean Coal Centre - UK
- Thai Mozambique Logistica
- Meralco Power Generation, Philippines
- Singapore Mercantile Exchange
- Sree Jayajothi Cements Limited - India
- Wilmar Investment Holdings
- Kaltim Prima Coal - Indonesia
- Commonwealth Bank - Australia
- Jorong Barutama Greston.PT - Indonesia
- Karbindo Abesyapradhi - Indoneisa
- Chamber of Mines of South Africa
- New Zealand Coal & Carbon
- Georgia Ports Authority, United States
- Coal and Oil Company - UAE
- Global Coal Blending Company Limited - Australia
- Anglo American - United Kingdom
- Offshore Bulk Terminal Pte Ltd, Singapore
- White Energy Company Limited
- Jaiprakash Power Ventures ltd
- Bahari Cakrawala Sebuku - Indonesia
- Altura Mining Limited, Indonesia
- SN Aboitiz Power Inc, Philippines
- Posco Energy - South Korea
- Standard Chartered Bank - UAE
- Vijayanagar Sugar Pvt Ltd - India
- Globalindo Alam Lestari - Indonesia
- Petron Corporation, Philippines
- Parry Sugars Refinery, India
- Coalindo Energy - Indonesia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Power Finance Corporation Ltd., India
- Vedanta Resources Plc - India
- Ind-Barath Power Infra Limited - India
- Kartika Selabumi Mining - Indonesia
- Bukit Asam (Persero) Tbk - Indonesia
- Indian Energy Exchange, India
- PTC India Limited - India
- Borneo Indobara - Indonesia
- Essar Steel Hazira Ltd - India
- Therma Luzon, Inc, Philippines
- Baramulti Group, Indonesia
- Bangladesh Power Developement Board
- Petrochimia International Co. Ltd.- Taiwan
- Energy Development Corp, Philippines
- Samtan Co., Ltd - South Korea
- London Commodity Brokers - England
- SMG Consultants - Indonesia
- Global Green Power PLC Corporation, Philippines
- Sinarmas Energy and Mining - Indonesia
- Economic Council, Georgia
- Lanco Infratech Ltd - India
- Pipit Mutiara Jaya. PT, Indonesia
- Central Java Power - Indonesia
- Indonesian Coal Mining Association
- CNBM International Corporation - China
- Sical Logistics Limited - India
- Planning Commission, India
- Gujarat Mineral Development Corp Ltd - India
- ASAPP Information Group - India
- Bukit Makmur.PT - Indonesia
- Bukit Baiduri Energy - Indonesia
- Independent Power Producers Association of India
- Marubeni Corporation - India
- CIMB Investment Bank - Malaysia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- OPG Power Generation Pvt Ltd - India
- Tamil Nadu electricity Board
- Iligan Light & Power Inc, Philippines
- Australian Coal Association
- Sindya Power Generating Company Private Ltd
- Salva Resources Pvt Ltd - India
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