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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, 17 February 22
MAJOR INSTITUTIONS PROVIDED OVER $1.5 TRLN TO COAL SECTOR IN 2019-2021, SAYS NGO GROUP - REUTERS
Financial institutions channelled more than $1.5 trillion into the coal industry in loans and underwriting from January 2019 to November 2021, even ...
Thursday, 17 February 22
APAC THERMAL COAL PRICES TO EASE ON END OF INDONESIA EXPORT BAN - FITCH RATINGS
Fitch Ratings-Shanghai/Singapore-14 February 2022: APAC thermal coal prices are likely to come under pressure in the near term due to seasonally we ...
Tuesday, 15 February 22
IS ANOTHER COAL SHORTAGE CRISIS LOOMING OVER INDIA? - BUSINESS STANDARD
In December last year, the Federation of Indian Mineral Industries (FIMI) shot off a letter to the Prime Minister claiming that the coal crisis was ...
Tuesday, 15 February 22
THERMAL COAL'S RECORD PRICE RUN MAY END UP ITS OWN WORST ENEMY - REUTERS
The price of benchmark Australian thermal coal rose last week to trade near record highs, providing a short-term boost to producers but increasing ...
Thursday, 10 February 22
INDONESIA: COAL EXPORT BAN - SKULD
Indonesia's coal export ban in the light of force majeure and off-hire clauses
In January 2022, Indonesia, the world's biggest exporte ...
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- Ministry of Finance - Indonesia
- European Bulk Services B.V. - Netherlands
- AsiaOL BioFuels Corp., Philippines
- Agrawal Coal Company - India
- Thiess Contractors Indonesia
- Kumho Petrochemical, South Korea
- Dalmia Cement Bharat India
- Meenaskhi Energy Private Limited - India
- Ministry of Mines - Canada
- Barasentosa Lestari - Indonesia
- Edison Trading Spa - Italy
- Kepco SPC Power Corporation, Philippines
- Siam City Cement - Thailand
- Indonesian Coal Mining Association
- GVK Power & Infra Limited - India
- Interocean Group of Companies - India
- London Commodity Brokers - England
- Billiton Holdings Pty Ltd - Australia
- Orica Australia Pty. Ltd.
- Central Electricity Authority - India
- Bhoruka Overseas - Indonesia
- Marubeni Corporation - India
- International Coal Ventures Pvt Ltd - India
- Coalindo Energy - Indonesia
- SN Aboitiz Power Inc, Philippines
- Formosa Plastics Group - Taiwan
- Cigading International Bulk Terminal - Indonesia
- Goldman Sachs - Singapore
- Larsen & Toubro Limited - India
- Kaltim Prima Coal - Indonesia
- Trasteel International SA, Italy
- Vedanta Resources Plc - India
- GAC Shipping (India) Pvt Ltd
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- PetroVietnam Power Coal Import and Supply Company
- Banpu Public Company Limited - Thailand
- Medco Energi Mining Internasional
- Videocon Industries ltd - India
- Eastern Coal Council - USA
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Toyota Tsusho Corporation, Japan
- Port Waratah Coal Services - Australia
- Iligan Light & Power Inc, Philippines
- Essar Steel Hazira Ltd - India
- Indian Oil Corporation Limited
- Offshore Bulk Terminal Pte Ltd, Singapore
- TNB Fuel Sdn Bhd - Malaysia
- GN Power Mariveles Coal Plant, Philippines
- Miang Besar Coal Terminal - Indonesia
- Ceylon Electricity Board - Sri Lanka
- Riau Bara Harum - Indonesia
- Power Finance Corporation Ltd., India
- Savvy Resources Ltd - HongKong
- Therma Luzon, Inc, Philippines
- Bulk Trading Sa - Switzerland
- Intertek Mineral Services - Indonesia
- Neyveli Lignite Corporation Ltd, - India
- Ambuja Cements Ltd - India
- Manunggal Multi Energi - Indonesia
- Maheswari Brothers Coal Limited - India
- SMC Global Power, Philippines
- Minerals Council of Australia
- Chettinad Cement Corporation Ltd - India
- Tamil Nadu electricity Board
- Makarim & Taira - Indonesia
- Central Java Power - Indonesia
- Rio Tinto Coal - Australia
- Semirara Mining and Power Corporation, Philippines
- Holcim Trading Pte Ltd - Singapore
- Bhatia International Limited - India
- Kohat Cement Company Ltd. - Pakistan
- Global Business Power Corporation, Philippines
- Straits Asia Resources Limited - Singapore
- Mintek Dendrill Indonesia
- Directorate General of MIneral and Coal - Indonesia
- Grasim Industreis Ltd - India
- Kalimantan Lumbung Energi - Indonesia
- Siam City Cement PLC, Thailand
- Mjunction Services Limited - India
- Gujarat Mineral Development Corp Ltd - India
- Orica Mining Services - Indonesia
- Cement Manufacturers Association - India
- Global Coal Blending Company Limited - Australia
- Attock Cement Pakistan Limited
- Madhucon Powers Ltd - India
- Meralco Power Generation, Philippines
- Indika Energy - Indonesia
- Bangladesh Power Developement Board
- VISA Power Limited - India
- Karbindo Abesyapradhi - Indoneisa
- IHS Mccloskey Coal Group - USA
- Simpson Spence & Young - Indonesia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Wilmar Investment Holdings
- Parry Sugars Refinery, India
- Kartika Selabumi Mining - Indonesia
- Bukit Baiduri Energy - Indonesia
- Petron Corporation, Philippines
- Altura Mining Limited, Indonesia
- Bhushan Steel Limited - India
- Sree Jayajothi Cements Limited - India
- Timah Investasi Mineral - Indoneisa
- Merrill Lynch Commodities Europe
- Kideco Jaya Agung - Indonesia
- LBH Netherlands Bv - Netherlands
- Chamber of Mines of South Africa
- Borneo Indobara - Indonesia
- Sarangani Energy Corporation, Philippines
- Sindya Power Generating Company Private Ltd
- Jorong Barutama Greston.PT - Indonesia
- Sojitz Corporation - Japan
- India Bulls Power Limited - India
- McConnell Dowell - Australia
- Eastern Energy - Thailand
- New Zealand Coal & Carbon
- Bharathi Cement Corporation - India
- Singapore Mercantile Exchange
- Coastal Gujarat Power Limited - India
- Globalindo Alam Lestari - Indonesia
- Tata Chemicals Ltd - India
- Oldendorff Carriers - Singapore
- Uttam Galva Steels Limited - India
- Metalloyd Limited - United Kingdom
- Bukit Makmur.PT - Indonesia
- OPG Power Generation Pvt Ltd - India
- Jindal Steel & Power Ltd - India
- Alfred C Toepfer International GmbH - Germany
- Vizag Seaport Private Limited - India
- Heidelberg Cement - Germany
- The University of Queensland
- Anglo American - United Kingdom
- Sinarmas Energy and Mining - Indonesia
- Wood Mackenzie - Singapore
- Bank of Tokyo Mitsubishi UFJ Ltd
- Electricity Authority, New Zealand
- Africa Commodities Group - South Africa
- IEA Clean Coal Centre - UK
- Bahari Cakrawala Sebuku - Indonesia
- Maharashtra Electricity Regulatory Commission - India
- PowerSource Philippines DevCo
- Ministry of Transport, Egypt
- Standard Chartered Bank - UAE
- Binh Thuan Hamico - Vietnam
- Australian Coal Association
- Energy Development Corp, Philippines
- Bayan Resources Tbk. - Indonesia
- Mercator Lines Limited - India
- Star Paper Mills Limited - India
- Aditya Birla Group - India
- San Jose City I Power Corp, Philippines
- Kapuas Tunggal Persada - Indonesia
- Indo Tambangraya Megah - Indonesia
- PNOC Exploration Corporation - Philippines
- Mercuria Energy - Indonesia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Aboitiz Power Corporation - Philippines
- Latin American Coal - Colombia
- Pipit Mutiara Jaya. PT, Indonesia
- Sakthi Sugars Limited - India
- Baramulti Group, Indonesia
- Sical Logistics Limited - India
- Xindia Steels Limited - India
- South Luzon Thermal Energy Corporation
- CIMB Investment Bank - Malaysia
- Malabar Cements Ltd - India
- Krishnapatnam Port Company Ltd. - India
- Global Green Power PLC Corporation, Philippines
- Lanco Infratech Ltd - India
- Gujarat Sidhee Cement - India
- Gujarat Electricity Regulatory Commission - India
- ASAPP Information Group - India
- White Energy Company Limited
- Jaiprakash Power Ventures ltd
- TeaM Sual Corporation - Philippines
- Georgia Ports Authority, United States
- Vijayanagar Sugar Pvt Ltd - India
- Romanian Commodities Exchange
- Electricity Generating Authority of Thailand
- Commonwealth Bank - Australia
- ICICI Bank Limited - India
- Independent Power Producers Association of India
- Samtan Co., Ltd - South Korea
- Parliament of New Zealand
- The State Trading Corporation of India Ltd
- Indian Energy Exchange, India
- Indogreen Group - Indonesia
- Karaikal Port Pvt Ltd - India
- Planning Commission, India
- Semirara Mining Corp, Philippines
- Pendopo Energi Batubara - Indonesia
- Leighton Contractors Pty Ltd - Australia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Petrochimia International Co. Ltd.- Taiwan
- Price Waterhouse Coopers - Russia
- Posco Energy - South Korea
- MS Steel International - UAE
- Deloitte Consulting - India
- CNBM International Corporation - China
- Kobexindo Tractors - Indoneisa
- The Treasury - Australian Government
- Salva Resources Pvt Ltd - India
- Economic Council, Georgia
- Carbofer General Trading SA - India
- Coal and Oil Company - UAE
- SMG Consultants - Indonesia
- Ind-Barath Power Infra Limited - India
- Australian Commodity Traders Exchange
- Renaissance Capital - South Africa
- Rashtriya Ispat Nigam Limited - India
- Bukit Asam (Persero) Tbk - Indonesia
- PTC India Limited - India
- Asmin Koalindo Tuhup - Indonesia
- Energy Link Ltd, New Zealand
- Antam Resourcindo - Indonesia
- Directorate Of Revenue Intelligence - India
- GMR Energy Limited - India
- Thai Mozambique Logistica
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