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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 $40,000/day earning bulk carrier to go off hire waiting for bunker supplies), worsening weather conditions, help prevent claims, bundle up several enquiries to achieve volume discounts and even help with bunker planning and suggest the most optimal port or combination of ports to bunker your vessel.
Source: Integr8 Fuels
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Wednesday, 13 July 22
MARKET INSIGHT - INTERMODAL
Taking the previous market insight a step further, market sentiment remains bullish regarding the overall ROI of scrubbers, facing tailwinds from a ...
Friday, 08 July 22
AUSTRALIAN COAL PRICE BREAKS AGAIN LEVEL US$ 400/TON!, UP AROUND 4% - CNBC INDONESIA
Coal prices shot up again and crossed the level of US$ 400 per ton. On Thursday (7/7/2022) trading, the selling price of August contract closed at ...
Friday, 08 July 22
INDONESIA MULLS MORE FREQUENT SETTING OF CRUDE PALM OIL REFERENCE PRICE - REUTERS
Indonesia is considering setting its crude palm oil (CPO) export reference price every two weeks instead of monthly, a senior trade ministry offici ...
Friday, 08 July 22
BUNKER PRICES EXPECTED TO RECOVER LOST GROUND NEXT WEEK - SERGEY IVANOV, MABUX
Over the Week 27, the world bunker indices showed a sharp decline, primarily due to the fall in oil prices on July 05. The 380 HSFO index fell by 5 ...
Thursday, 07 July 22
NTPC MINES 61% MORE COAL AT 4.22 MN METRIC TONNES IN APRIL-JUNE: PTI
State-owned power giant NTPC on Tuesday said that its coal output grew by 61 per cent to Rs 42.40 lakh metric tonnes in April-June quarter from 26. ...
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- Toyota Tsusho Corporation, Japan
- Mintek Dendrill Indonesia
- PowerSource Philippines DevCo
- Bharathi Cement Corporation - India
- European Bulk Services B.V. - Netherlands
- Essar Steel Hazira Ltd - India
- Goldman Sachs - Singapore
- Jaiprakash Power Ventures ltd
- Merrill Lynch Commodities Europe
- Bhatia International Limited - India
- Kalimantan Lumbung Energi - Indonesia
- Tamil Nadu electricity Board
- Billiton Holdings Pty Ltd - Australia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- IHS Mccloskey Coal Group - USA
- ICICI Bank Limited - India
- Ministry of Mines - Canada
- Asmin Koalindo Tuhup - Indonesia
- Eastern Coal Council - USA
- The State Trading Corporation of India Ltd
- Sical Logistics Limited - India
- Semirara Mining and Power Corporation, Philippines
- Straits Asia Resources Limited - Singapore
- Gujarat Mineral Development Corp Ltd - India
- SMG Consultants - Indonesia
- Offshore Bulk Terminal Pte Ltd, Singapore
- The Treasury - Australian Government
- Orica Mining Services - Indonesia
- Ministry of Transport, Egypt
- Makarim & Taira - Indonesia
- Vijayanagar Sugar Pvt Ltd - India
- Lanco Infratech Ltd - India
- Sakthi Sugars Limited - India
- Port Waratah Coal Services - Australia
- Romanian Commodities Exchange
- Bhoruka Overseas - Indonesia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Cigading International Bulk Terminal - Indonesia
- Singapore Mercantile Exchange
- Ministry of Finance - Indonesia
- Indian Energy Exchange, India
- Meenaskhi Energy Private Limited - India
- Vizag Seaport Private Limited - India
- Petron Corporation, Philippines
- Latin American Coal - Colombia
- Alfred C Toepfer International GmbH - Germany
- GMR Energy Limited - India
- Orica Australia Pty. Ltd.
- Kapuas Tunggal Persada - Indonesia
- Eastern Energy - Thailand
- Riau Bara Harum - Indonesia
- Formosa Plastics Group - Taiwan
- Directorate General of MIneral and Coal - Indonesia
- Rio Tinto Coal - Australia
- Intertek Mineral Services - Indonesia
- Aditya Birla Group - India
- Parry Sugars Refinery, India
- Tata Chemicals Ltd - India
- Manunggal Multi Energi - Indonesia
- Maharashtra Electricity Regulatory Commission - India
- Grasim Industreis Ltd - India
- Miang Besar Coal Terminal - Indonesia
- Maheswari Brothers Coal Limited - India
- Indogreen Group - Indonesia
- Simpson Spence & Young - Indonesia
- Iligan Light & Power Inc, Philippines
- Coal and Oil Company - UAE
- Mercator Lines Limited - India
- Australian Commodity Traders Exchange
- Siam City Cement PLC, Thailand
- Electricity Authority, New Zealand
- Karbindo Abesyapradhi - Indoneisa
- Agrawal Coal Company - India
- Attock Cement Pakistan Limited
- Samtan Co., Ltd - South Korea
- Cement Manufacturers Association - India
- PNOC Exploration Corporation - Philippines
- Global Business Power Corporation, Philippines
- Global Coal Blending Company Limited - Australia
- Pendopo Energi Batubara - Indonesia
- Standard Chartered Bank - UAE
- Vedanta Resources Plc - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- White Energy Company Limited
- ASAPP Information Group - India
- Energy Link Ltd, New Zealand
- AsiaOL BioFuels Corp., Philippines
- Wilmar Investment Holdings
- Bayan Resources Tbk. - Indonesia
- Borneo Indobara - Indonesia
- TeaM Sual Corporation - Philippines
- Georgia Ports Authority, United States
- Larsen & Toubro Limited - India
- Jorong Barutama Greston.PT - Indonesia
- Coastal Gujarat Power Limited - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Kumho Petrochemical, South Korea
- Planning Commission, India
- Thiess Contractors Indonesia
- Star Paper Mills Limited - India
- Coalindo Energy - Indonesia
- GVK Power & Infra Limited - India
- Thai Mozambique Logistica
- Electricity Generating Authority of Thailand
- South Luzon Thermal Energy Corporation
- GN Power Mariveles Coal Plant, Philippines
- Antam Resourcindo - Indonesia
- Sree Jayajothi Cements Limited - India
- Wood Mackenzie - Singapore
- Leighton Contractors Pty Ltd - Australia
- Altura Mining Limited, Indonesia
- San Jose City I Power Corp, Philippines
- Binh Thuan Hamico - Vietnam
- Kohat Cement Company Ltd. - Pakistan
- Krishnapatnam Port Company Ltd. - India
- Semirara Mining Corp, Philippines
- Economic Council, Georgia
- Bukit Baiduri Energy - Indonesia
- Aboitiz Power Corporation - Philippines
- Salva Resources Pvt Ltd - India
- Heidelberg Cement - Germany
- Ambuja Cements Ltd - India
- Dalmia Cement Bharat India
- Chamber of Mines of South Africa
- Madhucon Powers Ltd - India
- Rashtriya Ispat Nigam Limited - India
- Energy Development Corp, Philippines
- Oldendorff Carriers - Singapore
- Jindal Steel & Power Ltd - India
- LBH Netherlands Bv - Netherlands
- The University of Queensland
- Kartika Selabumi Mining - Indonesia
- Bahari Cakrawala Sebuku - Indonesia
- India Bulls Power Limited - India
- Uttam Galva Steels Limited - India
- Bukit Asam (Persero) Tbk - Indonesia
- Barasentosa Lestari - Indonesia
- GAC Shipping (India) Pvt Ltd
- Parliament of New Zealand
- Posco Energy - South Korea
- TNB Fuel Sdn Bhd - Malaysia
- Indian Oil Corporation Limited
- Global Green Power PLC Corporation, Philippines
- Renaissance Capital - South Africa
- Interocean Group of Companies - India
- Central Electricity Authority - India
- Therma Luzon, Inc, Philippines
- Central Java Power - Indonesia
- International Coal Ventures Pvt Ltd - India
- Deloitte Consulting - India
- Power Finance Corporation Ltd., India
- Kaltim Prima Coal - Indonesia
- Minerals Council of Australia
- Bhushan Steel Limited - India
- Indonesian Coal Mining Association
- Bulk Trading Sa - Switzerland
- New Zealand Coal & Carbon
- PTC India Limited - India
- London Commodity Brokers - England
- Sindya Power Generating Company Private Ltd
- Kideco Jaya Agung - Indonesia
- Indika Energy - Indonesia
- Ceylon Electricity Board - Sri Lanka
- Sinarmas Energy and Mining - Indonesia
- Australian Coal Association
- Directorate Of Revenue Intelligence - India
- SN Aboitiz Power Inc, Philippines
- PetroVietnam Power Coal Import and Supply Company
- Edison Trading Spa - Italy
- Siam City Cement - Thailand
- Sojitz Corporation - Japan
- OPG Power Generation Pvt Ltd - India
- Timah Investasi Mineral - Indoneisa
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Petrochimia International Co. Ltd.- Taiwan
- Holcim Trading Pte Ltd - Singapore
- Xindia Steels Limited - India
- Sarangani Energy Corporation, Philippines
- CNBM International Corporation - China
- Pipit Mutiara Jaya. PT, Indonesia
- IEA Clean Coal Centre - UK
- VISA Power Limited - India
- Medco Energi Mining Internasional
- Kobexindo Tractors - Indoneisa
- Malabar Cements Ltd - India
- Gujarat Sidhee Cement - India
- Price Waterhouse Coopers - Russia
- Bangladesh Power Developement Board
- Banpu Public Company Limited - Thailand
- SMC Global Power, Philippines
- Commonwealth Bank - Australia
- Globalindo Alam Lestari - Indonesia
- Baramulti Group, Indonesia
- Kepco SPC Power Corporation, Philippines
- Marubeni Corporation - India
- Indo Tambangraya Megah - Indonesia
- CIMB Investment Bank - Malaysia
- Gujarat Electricity Regulatory Commission - India
- Neyveli Lignite Corporation Ltd, - India
- MS Steel International - UAE
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Anglo American - United Kingdom
- Mjunction Services Limited - India
- Carbofer General Trading SA - India
- McConnell Dowell - Australia
- Ind-Barath Power Infra Limited - India
- Metalloyd Limited - United Kingdom
- Videocon Industries ltd - India
- Independent Power Producers Association of India
- Trasteel International SA, Italy
- Meralco Power Generation, Philippines
- Karaikal Port Pvt Ltd - India
- Chettinad Cement Corporation Ltd - India
- Mercuria Energy - Indonesia
- Savvy Resources Ltd - HongKong
- Africa Commodities Group - South Africa
- Bukit Makmur.PT - Indonesia
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