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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, 30 June 22
INVESTMENT IN GLOBAL COAL SUPPLY CHAIN TO HIT $115 BN IN 2022, LED BY CHINA AND INDIA - BUSINESS LINE
At over $80 billion, China and India are anticipated to make up the bulk of global coal investment in 2022, says IEA.
The investment ...
Wednesday, 29 June 22
LNG MARKET REMAINS TIGHT - INTERMODAL
LNG market remains tight currently, mainly driven by the US LNG outage from the recent fire in Freeport LNG terminal together with the recent fall ...
Wednesday, 29 June 22
CHINA'S NEW PLAN FOR RENEWABLE ENERGY DEVELOPMENT FOCUSES ON CONSUMPTION - FITCH RATINGS
China’s focus on consumption penetration for renewable energy development in its recently released 14th five-year plan – 2021 to 2025 & ...
Wednesday, 29 June 22
APAC CORPORATE SECTOR OUTLOOKS SHIFT AMID GLOBAL SHOCKS - FITCH RATINGS’
Fitch Ratings’ mid-2022 corporate sector outlook review revealed that the Asia-Pacific (APAC) region saw the largest number of sector outlook ...
Thursday, 16 June 22
MARKET INSIGHT - INTERMODAL
Picking up from my last insight in March, on the early days of the invasion, it's worth pointing out the way that the fast-paced working enviro ...
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- Petron Corporation, Philippines
- Electricity Authority, New Zealand
- Indo Tambangraya Megah - Indonesia
- Star Paper Mills Limited - India
- Directorate General of MIneral and Coal - Indonesia
- Kohat Cement Company Ltd. - Pakistan
- Orica Mining Services - Indonesia
- Thai Mozambique Logistica
- Jindal Steel & Power Ltd - India
- MS Steel International - UAE
- Australian Coal Association
- Sree Jayajothi Cements Limited - India
- Trasteel International SA, Italy
- Gujarat Sidhee Cement - India
- Krishnapatnam Port Company Ltd. - India
- Wilmar Investment Holdings
- Pendopo Energi Batubara - Indonesia
- Baramulti Group, Indonesia
- Independent Power Producers Association of India
- GAC Shipping (India) Pvt Ltd
- Bank of Tokyo Mitsubishi UFJ Ltd
- Bukit Makmur.PT - Indonesia
- Bhushan Steel Limited - India
- Kalimantan Lumbung Energi - Indonesia
- Australian Commodity Traders Exchange
- Edison Trading Spa - Italy
- Maharashtra Electricity Regulatory Commission - India
- Siam City Cement PLC, Thailand
- Iligan Light & Power Inc, Philippines
- Bharathi Cement Corporation - India
- South Luzon Thermal Energy Corporation
- Ministry of Transport, Egypt
- Altura Mining Limited, Indonesia
- Videocon Industries ltd - India
- Posco Energy - South Korea
- Binh Thuan Hamico - Vietnam
- Agrawal Coal Company - India
- Central Electricity Authority - India
- London Commodity Brokers - England
- Karbindo Abesyapradhi - Indoneisa
- Mintek Dendrill Indonesia
- Renaissance Capital - South Africa
- TeaM Sual Corporation - Philippines
- Neyveli Lignite Corporation Ltd, - India
- Leighton Contractors Pty Ltd - Australia
- Port Waratah Coal Services - Australia
- Bangladesh Power Developement Board
- Jaiprakash Power Ventures ltd
- Jorong Barutama Greston.PT - Indonesia
- Latin American Coal - Colombia
- Deloitte Consulting - India
- European Bulk Services B.V. - Netherlands
- Kumho Petrochemical, South Korea
- Lanco Infratech Ltd - India
- Carbofer General Trading SA - India
- Indika Energy - Indonesia
- Semirara Mining and Power Corporation, Philippines
- Karaikal Port Pvt Ltd - India
- Anglo American - United Kingdom
- Uttam Galva Steels Limited - India
- Bayan Resources Tbk. - Indonesia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Kaltim Prima Coal - Indonesia
- SMG Consultants - Indonesia
- Global Business Power Corporation, Philippines
- Planning Commission, India
- Coastal Gujarat Power Limited - India
- Essar Steel Hazira Ltd - India
- Barasentosa Lestari - Indonesia
- Indian Oil Corporation Limited
- IEA Clean Coal Centre - UK
- Chettinad Cement Corporation Ltd - India
- OPG Power Generation Pvt Ltd - India
- Coalindo Energy - Indonesia
- Petrochimia International Co. Ltd.- Taiwan
- Wood Mackenzie - Singapore
- TNB Fuel Sdn Bhd - Malaysia
- Parliament of New Zealand
- Georgia Ports Authority, United States
- Cement Manufacturers Association - India
- Borneo Indobara - Indonesia
- Kideco Jaya Agung - Indonesia
- Commonwealth Bank - Australia
- Bhatia International Limited - India
- PowerSource Philippines DevCo
- McConnell Dowell - Australia
- Thiess Contractors Indonesia
- Energy Development Corp, Philippines
- Kepco SPC Power Corporation, Philippines
- The State Trading Corporation of India Ltd
- Toyota Tsusho Corporation, Japan
- Vedanta Resources Plc - India
- Antam Resourcindo - Indonesia
- Banpu Public Company Limited - Thailand
- Maheswari Brothers Coal Limited - India
- Kobexindo Tractors - Indoneisa
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Indogreen Group - Indonesia
- Bulk Trading Sa - Switzerland
- VISA Power Limited - India
- Ambuja Cements Ltd - India
- Price Waterhouse Coopers - Russia
- Makarim & Taira - Indonesia
- Rashtriya Ispat Nigam Limited - India
- Bhoruka Overseas - Indonesia
- Meenaskhi Energy Private Limited - India
- Mjunction Services Limited - India
- White Energy Company Limited
- CIMB Investment Bank - Malaysia
- PNOC Exploration Corporation - Philippines
- GVK Power & Infra Limited - India
- SN Aboitiz Power Inc, Philippines
- Cigading International Bulk Terminal - Indonesia
- Tamil Nadu electricity Board
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Ind-Barath Power Infra Limited - India
- Goldman Sachs - Singapore
- Therma Luzon, Inc, Philippines
- Sojitz Corporation - Japan
- Vijayanagar Sugar Pvt Ltd - India
- Bukit Asam (Persero) Tbk - Indonesia
- Aditya Birla Group - India
- San Jose City I Power Corp, Philippines
- Global Green Power PLC Corporation, Philippines
- Meralco Power Generation, Philippines
- Ministry of Finance - Indonesia
- Bahari Cakrawala Sebuku - Indonesia
- Samtan Co., Ltd - South Korea
- Alfred C Toepfer International GmbH - Germany
- LBH Netherlands Bv - Netherlands
- Chamber of Mines of South Africa
- PTC India Limited - India
- Rio Tinto Coal - Australia
- Merrill Lynch Commodities Europe
- Aboitiz Power Corporation - Philippines
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- The Treasury - Australian Government
- Eastern Energy - Thailand
- Tata Chemicals Ltd - India
- Medco Energi Mining Internasional
- Coal and Oil Company - UAE
- Eastern Coal Council - USA
- Bukit Baiduri Energy - Indonesia
- Formosa Plastics Group - Taiwan
- Power Finance Corporation Ltd., India
- Economic Council, Georgia
- Sindya Power Generating Company Private Ltd
- Global Coal Blending Company Limited - Australia
- Madhucon Powers Ltd - India
- Ministry of Mines - Canada
- Attock Cement Pakistan Limited
- Mercuria Energy - Indonesia
- Siam City Cement - Thailand
- Indian Energy Exchange, India
- Gujarat Electricity Regulatory Commission - India
- Manunggal Multi Energi - Indonesia
- Electricity Generating Authority of Thailand
- Central Java Power - Indonesia
- Timah Investasi Mineral - Indoneisa
- Asmin Koalindo Tuhup - Indonesia
- Sarangani Energy Corporation, Philippines
- Vizag Seaport Private Limited - India
- India Bulls Power Limited - India
- Sinarmas Energy and Mining - Indonesia
- Standard Chartered Bank - UAE
- Gujarat Mineral Development Corp Ltd - India
- Semirara Mining Corp, Philippines
- Singapore Mercantile Exchange
- Metalloyd Limited - United Kingdom
- Directorate Of Revenue Intelligence - India
- Africa Commodities Group - South Africa
- Interocean Group of Companies - India
- Romanian Commodities Exchange
- Sical Logistics Limited - India
- Energy Link Ltd, New Zealand
- GMR Energy Limited - India
- CNBM International Corporation - China
- Heidelberg Cement - Germany
- Marubeni Corporation - India
- The University of Queensland
- Grasim Industreis Ltd - India
- Ceylon Electricity Board - Sri Lanka
- Sakthi Sugars Limited - India
- Minerals Council of Australia
- Larsen & Toubro Limited - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Oldendorff Carriers - Singapore
- Orica Australia Pty. Ltd.
- Mercator Lines Limited - India
- AsiaOL BioFuels Corp., Philippines
- IHS Mccloskey Coal Group - USA
- Billiton Holdings Pty Ltd - Australia
- Miang Besar Coal Terminal - Indonesia
- PetroVietnam Power Coal Import and Supply Company
- ICICI Bank Limited - India
- Malabar Cements Ltd - India
- Dalmia Cement Bharat India
- Holcim Trading Pte Ltd - Singapore
- Simpson Spence & Young - Indonesia
- Indonesian Coal Mining Association
- Intertek Mineral Services - Indonesia
- SMC Global Power, Philippines
- New Zealand Coal & Carbon
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Globalindo Alam Lestari - Indonesia
- Xindia Steels Limited - India
- Savvy Resources Ltd - HongKong
- Kartika Selabumi Mining - Indonesia
- GN Power Mariveles Coal Plant, Philippines
- ASAPP Information Group - India
- Pipit Mutiara Jaya. PT, Indonesia
- Straits Asia Resources Limited - Singapore
- Salva Resources Pvt Ltd - India
- International Coal Ventures Pvt Ltd - India
- Kapuas Tunggal Persada - Indonesia
- Riau Bara Harum - Indonesia
- Parry Sugars Refinery, India
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