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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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Friday, 04 February 22
RENEWABLES ON THE RISE, COAL CONTINUOUSLY FALLING - EUROPEAN COMMISSION
Although oil (34.5%) and natural gas (23.7%) were still the most important fuel sources in the EU energy mix in 2020, renewable energy’s shar ...
Thursday, 03 February 22
COAL SHORTAGE NOW AT ALARMING LEVELS, SAY ALUMINIUM PRODUCERS - IANS
With no relief in sight despite coal stocks running critically low and production disruptions looming across the Indian aluminium sector, the Alumi ...
Wednesday, 02 February 22
HIGH COKING COAL PRICES PROVIDE GLIMPSE INTO STEELMAKING'S FUTURE - MCKINSEY
Last year was a volatile one in global commodity markets. Demand for coking coal, an essential raw material in the production of steel, was extreme ...
Wednesday, 02 February 22
INDONESIA'S RESTRICTIONS ON COMMODITIES RATTLE MARKETS, MORE MOVES LIKELY - REUTERS
In just the first month of this year, Indonesian policymakers have rattled global markets with restrictions on some of its biggest commodities expo ...
Wednesday, 02 February 22
CHINA'S TOP COAL PRODUCER FORECASTS 28 PCT PROFIT GROWTH IN 2021 - XINHUA
China Shenhua Energy Company Limited, one of the country’s biggest coal producers, said its net profits are expected to jump by 28 percent in ...
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- Star Paper Mills Limited - India
- Bhatia International Limited - India
- Power Finance Corporation Ltd., India
- Toyota Tsusho Corporation, Japan
- Indian Energy Exchange, India
- Bukit Asam (Persero) Tbk - Indonesia
- Directorate General of MIneral and Coal - Indonesia
- Heidelberg Cement - Germany
- Bhushan Steel Limited - India
- Parry Sugars Refinery, India
- Bahari Cakrawala Sebuku - Indonesia
- IEA Clean Coal Centre - UK
- Ambuja Cements Ltd - India
- Madhucon Powers Ltd - India
- GN Power Mariveles Coal Plant, Philippines
- AsiaOL BioFuels Corp., Philippines
- PNOC Exploration Corporation - Philippines
- Lanco Infratech Ltd - India
- SN Aboitiz Power Inc, Philippines
- New Zealand Coal & Carbon
- Orica Mining Services - Indonesia
- White Energy Company Limited
- ICICI Bank Limited - India
- Coal and Oil Company - UAE
- Kartika Selabumi Mining - Indonesia
- Anglo American - United Kingdom
- Aboitiz Power Corporation - Philippines
- Savvy Resources Ltd - HongKong
- Grasim Industreis Ltd - India
- Ministry of Mines - Canada
- Indogreen Group - Indonesia
- South Luzon Thermal Energy Corporation
- Kumho Petrochemical, South Korea
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Coastal Gujarat Power Limited - India
- Ind-Barath Power Infra Limited - India
- Posco Energy - South Korea
- Manunggal Multi Energi - Indonesia
- Global Green Power PLC Corporation, Philippines
- Straits Asia Resources Limited - Singapore
- Mercator Lines Limited - India
- Parliament of New Zealand
- Bharathi Cement Corporation - India
- Pipit Mutiara Jaya. PT, Indonesia
- Central Electricity Authority - India
- Wilmar Investment Holdings
- Meralco Power Generation, Philippines
- The Treasury - Australian Government
- Siam City Cement PLC, Thailand
- Timah Investasi Mineral - Indoneisa
- Thiess Contractors Indonesia
- Videocon Industries ltd - India
- SMG Consultants - Indonesia
- Maheswari Brothers Coal Limited - India
- Attock Cement Pakistan Limited
- Cigading International Bulk Terminal - Indonesia
- Minerals Council of Australia
- European Bulk Services B.V. - Netherlands
- Banpu Public Company Limited - Thailand
- Sindya Power Generating Company Private Ltd
- Kalimantan Lumbung Energi - Indonesia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Gujarat Sidhee Cement - India
- Jorong Barutama Greston.PT - Indonesia
- Barasentosa Lestari - Indonesia
- Independent Power Producers Association of India
- India Bulls Power Limited - India
- GMR Energy Limited - India
- Pendopo Energi Batubara - Indonesia
- Orica Australia Pty. Ltd.
- Deloitte Consulting - India
- Metalloyd Limited - United Kingdom
- The State Trading Corporation of India Ltd
- Oldendorff Carriers - Singapore
- Uttam Galva Steels Limited - India
- GAC Shipping (India) Pvt Ltd
- Dalmia Cement Bharat India
- Ceylon Electricity Board - Sri Lanka
- Bank of Tokyo Mitsubishi UFJ Ltd
- Kobexindo Tractors - Indoneisa
- Baramulti Group, Indonesia
- Wood Mackenzie - Singapore
- San Jose City I Power Corp, Philippines
- Miang Besar Coal Terminal - Indonesia
- Malabar Cements Ltd - India
- Marubeni Corporation - India
- Indian Oil Corporation Limited
- Bhoruka Overseas - Indonesia
- Leighton Contractors Pty Ltd - Australia
- Rashtriya Ispat Nigam Limited - India
- PTC India Limited - India
- Economic Council, Georgia
- Neyveli Lignite Corporation Ltd, - India
- LBH Netherlands Bv - Netherlands
- Cement Manufacturers Association - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- TNB Fuel Sdn Bhd - Malaysia
- Maharashtra Electricity Regulatory Commission - India
- Eastern Coal Council - USA
- Coalindo Energy - Indonesia
- IHS Mccloskey Coal Group - USA
- OPG Power Generation Pvt Ltd - India
- Salva Resources Pvt Ltd - India
- Globalindo Alam Lestari - Indonesia
- Sical Logistics Limited - India
- TeaM Sual Corporation - Philippines
- Antam Resourcindo - Indonesia
- The University of Queensland
- Sakthi Sugars Limited - India
- Mercuria Energy - Indonesia
- Alfred C Toepfer International GmbH - Germany
- Altura Mining Limited, Indonesia
- Gujarat Mineral Development Corp Ltd - India
- Simpson Spence & Young - Indonesia
- Semirara Mining Corp, Philippines
- Petrochimia International Co. Ltd.- Taiwan
- Kohat Cement Company Ltd. - Pakistan
- Offshore Bulk Terminal Pte Ltd, Singapore
- Krishnapatnam Port Company Ltd. - India
- Riau Bara Harum - Indonesia
- SMC Global Power, Philippines
- ASAPP Information Group - India
- Gujarat Electricity Regulatory Commission - India
- Vijayanagar Sugar Pvt Ltd - India
- Standard Chartered Bank - UAE
- Singapore Mercantile Exchange
- Commonwealth Bank - Australia
- Kepco SPC Power Corporation, Philippines
- Port Waratah Coal Services - Australia
- Latin American Coal - Colombia
- Directorate Of Revenue Intelligence - India
- Trasteel International SA, Italy
- Semirara Mining and Power Corporation, Philippines
- Eastern Energy - Thailand
- Borneo Indobara - Indonesia
- Interocean Group of Companies - India
- Holcim Trading Pte Ltd - Singapore
- Jaiprakash Power Ventures ltd
- Renaissance Capital - South Africa
- Billiton Holdings Pty Ltd - Australia
- Sarangani Energy Corporation, Philippines
- Thai Mozambique Logistica
- Sojitz Corporation - Japan
- GVK Power & Infra Limited - India
- Indika Energy - Indonesia
- Petron Corporation, Philippines
- Tata Chemicals Ltd - India
- Australian Coal Association
- Intertek Mineral Services - Indonesia
- Goldman Sachs - Singapore
- Ministry of Finance - Indonesia
- MS Steel International - UAE
- Karbindo Abesyapradhi - Indoneisa
- Indonesian Coal Mining Association
- Bulk Trading Sa - Switzerland
- VISA Power Limited - India
- Bayan Resources Tbk. - Indonesia
- Xindia Steels Limited - India
- CIMB Investment Bank - Malaysia
- Carbofer General Trading SA - India
- Energy Link Ltd, New Zealand
- Kaltim Prima Coal - Indonesia
- Global Business Power Corporation, Philippines
- Binh Thuan Hamico - Vietnam
- London Commodity Brokers - England
- Mintek Dendrill Indonesia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Indo Tambangraya Megah - Indonesia
- Tamil Nadu electricity Board
- PowerSource Philippines DevCo
- Bukit Makmur.PT - Indonesia
- International Coal Ventures Pvt Ltd - India
- Ministry of Transport, Egypt
- Edison Trading Spa - Italy
- Georgia Ports Authority, United States
- Chamber of Mines of South Africa
- Asmin Koalindo Tuhup - Indonesia
- Samtan Co., Ltd - South Korea
- Kapuas Tunggal Persada - Indonesia
- McConnell Dowell - Australia
- Karaikal Port Pvt Ltd - India
- Medco Energi Mining Internasional
- Vizag Seaport Private Limited - India
- Mjunction Services Limited - India
- Makarim & Taira - Indonesia
- Price Waterhouse Coopers - Russia
- Vedanta Resources Plc - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- PetroVietnam Power Coal Import and Supply Company
- Meenaskhi Energy Private Limited - India
- Essar Steel Hazira Ltd - India
- Chettinad Cement Corporation Ltd - India
- Rio Tinto Coal - Australia
- Electricity Authority, New Zealand
- Planning Commission, India
- Iligan Light & Power Inc, Philippines
- CNBM International Corporation - China
- Central Java Power - Indonesia
- Aditya Birla Group - India
- Sinarmas Energy and Mining - Indonesia
- Jindal Steel & Power Ltd - India
- Global Coal Blending Company Limited - Australia
- Therma Luzon, Inc, Philippines
- Bangladesh Power Developement Board
- Larsen & Toubro Limited - India
- Africa Commodities Group - South Africa
- Bukit Baiduri Energy - Indonesia
- Energy Development Corp, Philippines
- Kideco Jaya Agung - Indonesia
- Australian Commodity Traders Exchange
- Agrawal Coal Company - India
- Siam City Cement - Thailand
- Romanian Commodities Exchange
- Merrill Lynch Commodities Europe
- Sree Jayajothi Cements Limited - India
- Electricity Generating Authority of Thailand
- Formosa Plastics Group - Taiwan
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