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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
SEEING RED? - WOOD MACKENZIE
What a Republican mid-term victory could mean for US energy and climate policy
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Thursday, 14 July 22
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Wednesday, 13 July 22
KOWEPO TO IMPORT 2.79 MILLION TONS OF LOW TO MEDIUM COAL
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Wednesday, 13 July 22
HAVE MINERS MISSED THE BOAT TO INVEST AND GET AHEAD OF THE ENERGY TRANSITION? - WOOD MACKENZIE
Miners are in rude health, benefiting from economic stimuli, the post-pandemic recovery and associated supply constraints. Initially the Ukraine wa ...
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- Larsen & Toubro Limited - India
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- Kumho Petrochemical, South Korea
- Global Coal Blending Company Limited - Australia
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- Petron Corporation, Philippines
- Karaikal Port Pvt Ltd - India
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- Toyota Tsusho Corporation, Japan
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- Sinarmas Energy and Mining - Indonesia
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- Sarangani Energy Corporation, Philippines
- Malabar Cements Ltd - India
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- Trasteel International SA, Italy
- Africa Commodities Group - South Africa
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- Australian Coal Association
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- Meralco Power Generation, Philippines
- PowerSource Philippines DevCo
- Latin American Coal - Colombia
- Commonwealth Bank - Australia
- Semirara Mining and Power Corporation, Philippines
- South Luzon Thermal Energy Corporation
- Goldman Sachs - Singapore
- Semirara Mining Corp, Philippines
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Sindya Power Generating Company Private Ltd
- Marubeni Corporation - India
- Thai Mozambique Logistica
- Singapore Mercantile Exchange
- Tamil Nadu electricity Board
- European Bulk Services B.V. - Netherlands
- Uttam Galva Steels Limited - India
- Energy Link Ltd, New Zealand
- Oldendorff Carriers - Singapore
- Iligan Light & Power Inc, Philippines
- Rashtriya Ispat Nigam Limited - India
- Videocon Industries ltd - India
- Chamber of Mines of South Africa
- Leighton Contractors Pty Ltd - Australia
- Central Electricity Authority - India
- Orica Mining Services - Indonesia
- CIMB Investment Bank - Malaysia
- Wood Mackenzie - Singapore
- Grasim Industreis Ltd - India
- Indian Oil Corporation Limited
- Global Business Power Corporation, Philippines
- Billiton Holdings Pty Ltd - Australia
- Bayan Resources Tbk. - Indonesia
- Parry Sugars Refinery, India
- Intertek Mineral Services - Indonesia
- Baramulti Group, Indonesia
- The Treasury - Australian Government
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- Meenaskhi Energy Private Limited - India
- Indika Energy - Indonesia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- SMC Global Power, Philippines
- Economic Council, Georgia
- Asmin Koalindo Tuhup - Indonesia
- Sakthi Sugars Limited - India
- AsiaOL BioFuels Corp., Philippines
- Power Finance Corporation Ltd., India
- Bukit Makmur.PT - Indonesia
- Sree Jayajothi Cements Limited - India
- Cigading International Bulk Terminal - Indonesia
- Kohat Cement Company Ltd. - Pakistan
- Heidelberg Cement - Germany
- Jaiprakash Power Ventures ltd
- Siam City Cement PLC, Thailand
- Interocean Group of Companies - India
- Bhatia International Limited - India
- SMG Consultants - Indonesia
- IEA Clean Coal Centre - UK
- Kapuas Tunggal Persada - Indonesia
- Altura Mining Limited, Indonesia
- PNOC Exploration Corporation - Philippines
- Indian Energy Exchange, India
- Agrawal Coal Company - India
- Samtan Co., Ltd - South Korea
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Renaissance Capital - South Africa
- Bahari Cakrawala Sebuku - Indonesia
- Vizag Seaport Private Limited - India
- Thiess Contractors Indonesia
- International Coal Ventures Pvt Ltd - India
- Romanian Commodities Exchange
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- Metalloyd Limited - United Kingdom
- Alfred C Toepfer International GmbH - Germany
- GMR Energy Limited - India
- GAC Shipping (India) Pvt Ltd
- Directorate General of MIneral and Coal - Indonesia
- Siam City Cement - Thailand
- Kaltim Prima Coal - Indonesia
- Maheswari Brothers Coal Limited - India
- Bharathi Cement Corporation - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- Ministry of Mines - Canada
- Carbofer General Trading SA - India
- Edison Trading Spa - Italy
- Global Green Power PLC Corporation, Philippines
- Therma Luzon, Inc, Philippines
- Posco Energy - South Korea
- Ministry of Finance - Indonesia
- Sical Logistics Limited - India
- Bukit Baiduri Energy - Indonesia
- Sojitz Corporation - Japan
- Barasentosa Lestari - Indonesia
- Simpson Spence & Young - Indonesia
- White Energy Company Limited
- Cement Manufacturers Association - India
- McConnell Dowell - Australia
- IHS Mccloskey Coal Group - USA
- Electricity Generating Authority of Thailand
- Vijayanagar Sugar Pvt Ltd - India
- GN Power Mariveles Coal Plant, Philippines
- OPG Power Generation Pvt Ltd - India
- ASAPP Information Group - India
- Anglo American - United Kingdom
- The University of Queensland
- Chettinad Cement Corporation Ltd - India
- Central Java Power - Indonesia
- Makarim & Taira - Indonesia
- Petrochimia International Co. Ltd.- Taiwan
- Borneo Indobara - Indonesia
- MS Steel International - UAE
- Wilmar Investment Holdings
- Tata Chemicals Ltd - India
- Georgia Ports Authority, United States
- Minerals Council of Australia
- Xindia Steels Limited - India
- Deloitte Consulting - India
- TNB Fuel Sdn Bhd - Malaysia
- London Commodity Brokers - England
- Bhushan Steel Limited - India
- Price Waterhouse Coopers - Russia
- GVK Power & Infra Limited - India
- Gujarat Electricity Regulatory Commission - India
- Coal and Oil Company - UAE
- Savvy Resources Ltd - HongKong
- Mercuria Energy - Indonesia
- Orica Australia Pty. Ltd.
- Attock Cement Pakistan Limited
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- San Jose City I Power Corp, Philippines
- Offshore Bulk Terminal Pte Ltd, Singapore
- Bhoruka Overseas - Indonesia
- Madhucon Powers Ltd - India
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