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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, 27 January 22
2022 - A YEAR OF REBALANCING FOR METALS AND MINING - WOOD MACKENZIE
If 2021 was the year of rebound for metals and mining (M&M) commodities, then 2022 is shaping as the year of rebalance, says Wood Mackenzie, a ...
Wednesday, 26 January 22
MARKET INSIGHT - INTERMODAL
While it is logical that most of the S&P reports of the first weeks of the year are linked to very limited activity as reflected in the weekly ...
Wednesday, 26 January 22
INDONESIA: DME PROJECT IS ECONOMICALLY VIABLE AS STUDY DEMONSTRATES
The government is encouraging downstream coal processing or increase in coal added value, for example by turning coal into Dimethyl Ether (DME) to ...
Wednesday, 26 January 22
COMMODITY PRICES COULD SOAR IF THE RUSSIA-UKRAINE CRISIS ESCALATES - ING
It appears that a number of commodity markets are starting to at least price in some geopolitical risk around the growing tension between Russia an ...
Wednesday, 26 January 22
INDONESIA'S COAL BAN SENDS PRICES SOARING, OTHER EXPORTERS FAIL TO STEP UP - REUTERS
Indonesia’s short-lived ban on exporting coal has sent ructions through the seaborne market for the fuel in Asia, with the fallout likely to ...
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- Wood Mackenzie - Singapore
- Planning Commission, India
- ICICI Bank Limited - India
- Sical Logistics Limited - India
- International Coal Ventures Pvt Ltd - India
- McConnell Dowell - Australia
- Energy Development Corp, Philippines
- Holcim Trading Pte Ltd - Singapore
- Carbofer General Trading SA - India
- Global Business Power Corporation, Philippines
- Coalindo Energy - Indonesia
- Merrill Lynch Commodities Europe
- South Luzon Thermal Energy Corporation
- Karaikal Port Pvt Ltd - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Australian Coal Association
- Marubeni Corporation - India
- Commonwealth Bank - Australia
- Karbindo Abesyapradhi - Indoneisa
- Metalloyd Limited - United Kingdom
- GN Power Mariveles Coal Plant, Philippines
- Bhatia International Limited - India
- India Bulls Power Limited - India
- Economic Council, Georgia
- ASAPP Information Group - India
- Simpson Spence & Young - Indonesia
- Tata Chemicals Ltd - India
- Bulk Trading Sa - Switzerland
- Posco Energy - South Korea
- Manunggal Multi Energi - Indonesia
- Kepco SPC Power Corporation, Philippines
- Madhucon Powers Ltd - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Altura Mining Limited, Indonesia
- Meralco Power Generation, Philippines
- Kartika Selabumi Mining - Indonesia
- Independent Power Producers Association of India
- Bukit Baiduri Energy - Indonesia
- Agrawal Coal Company - India
- Ind-Barath Power Infra Limited - India
- The University of Queensland
- Attock Cement Pakistan Limited
- Therma Luzon, Inc, Philippines
- TNB Fuel Sdn Bhd - Malaysia
- Cement Manufacturers Association - India
- Sinarmas Energy and Mining - Indonesia
- Africa Commodities Group - South Africa
- Rashtriya Ispat Nigam Limited - India
- Parliament of New Zealand
- Formosa Plastics Group - Taiwan
- Orica Australia Pty. Ltd.
- Central Electricity Authority - India
- The Treasury - Australian Government
- Ambuja Cements Ltd - India
- Chamber of Mines of South Africa
- Alfred C Toepfer International GmbH - Germany
- Vedanta Resources Plc - India
- Ceylon Electricity Board - Sri Lanka
- Mercator Lines Limited - India
- The State Trading Corporation of India Ltd
- Kohat Cement Company Ltd. - Pakistan
- IHS Mccloskey Coal Group - USA
- Semirara Mining and Power Corporation, Philippines
- Coal and Oil Company - UAE
- Petrochimia International Co. Ltd.- Taiwan
- Parry Sugars Refinery, India
- Toyota Tsusho Corporation, Japan
- San Jose City I Power Corp, Philippines
- Kalimantan Lumbung Energi - Indonesia
- Sindya Power Generating Company Private Ltd
- Renaissance Capital - South Africa
- Port Waratah Coal Services - Australia
- Indo Tambangraya Megah - Indonesia
- Chettinad Cement Corporation Ltd - India
- Pipit Mutiara Jaya. PT, Indonesia
- Mintek Dendrill Indonesia
- Borneo Indobara - Indonesia
- Georgia Ports Authority, United States
- Petron Corporation, Philippines
- Bayan Resources Tbk. - Indonesia
- Power Finance Corporation Ltd., India
- Anglo American - United Kingdom
- IEA Clean Coal Centre - UK
- Deloitte Consulting - India
- Aboitiz Power Corporation - Philippines
- Miang Besar Coal Terminal - Indonesia
- SMG Consultants - Indonesia
- Kumho Petrochemical, South Korea
- New Zealand Coal & Carbon
- Electricity Authority, New Zealand
- Central Java Power - Indonesia
- Ministry of Transport, Egypt
- Global Coal Blending Company Limited - Australia
- VISA Power Limited - India
- Medco Energi Mining Internasional
- Kapuas Tunggal Persada - Indonesia
- AsiaOL BioFuels Corp., Philippines
- Videocon Industries ltd - India
- Tamil Nadu electricity Board
- Ministry of Finance - Indonesia
- Intertek Mineral Services - Indonesia
- Lanco Infratech Ltd - India
- Edison Trading Spa - Italy
- Antam Resourcindo - Indonesia
- Binh Thuan Hamico - Vietnam
- CIMB Investment Bank - Malaysia
- Gujarat Sidhee Cement - India
- Iligan Light & Power Inc, Philippines
- Trasteel International SA, Italy
- Cigading International Bulk Terminal - Indonesia
- Samtan Co., Ltd - South Korea
- Essar Steel Hazira Ltd - India
- PowerSource Philippines DevCo
- Price Waterhouse Coopers - Russia
- Thai Mozambique Logistica
- Makarim & Taira - Indonesia
- SMC Global Power, Philippines
- Goldman Sachs - Singapore
- Bangladesh Power Developement Board
- Jaiprakash Power Ventures ltd
- Siam City Cement PLC, Thailand
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Jindal Steel & Power Ltd - India
- Pendopo Energi Batubara - Indonesia
- Kobexindo Tractors - Indoneisa
- Electricity Generating Authority of Thailand
- Sojitz Corporation - Japan
- Coastal Gujarat Power Limited - India
- Uttam Galva Steels Limited - India
- Heidelberg Cement - Germany
- Bhoruka Overseas - Indonesia
- LBH Netherlands Bv - Netherlands
- Bhushan Steel Limited - India
- Kideco Jaya Agung - Indonesia
- Gujarat Mineral Development Corp Ltd - India
- Banpu Public Company Limited - Thailand
- Star Paper Mills Limited - India
- Indian Oil Corporation Limited
- Sarangani Energy Corporation, Philippines
- Vijayanagar Sugar Pvt Ltd - India
- Eastern Coal Council - USA
- Sakthi Sugars Limited - India
- Xindia Steels Limited - India
- Kaltim Prima Coal - Indonesia
- White Energy Company Limited
- Australian Commodity Traders Exchange
- Bank of Tokyo Mitsubishi UFJ Ltd
- Rio Tinto Coal - Australia
- Standard Chartered Bank - UAE
- Oldendorff Carriers - Singapore
- Eastern Energy - Thailand
- PTC India Limited - India
- GAC Shipping (India) Pvt Ltd
- Siam City Cement - Thailand
- Malabar Cements Ltd - India
- Vizag Seaport Private Limited - India
- Romanian Commodities Exchange
- Riau Bara Harum - Indonesia
- Bahari Cakrawala Sebuku - Indonesia
- Jorong Barutama Greston.PT - Indonesia
- Asmin Koalindo Tuhup - Indonesia
- Globalindo Alam Lestari - Indonesia
- Wilmar Investment Holdings
- CNBM International Corporation - China
- TeaM Sual Corporation - Philippines
- Billiton Holdings Pty Ltd - Australia
- Maharashtra Electricity Regulatory Commission - India
- Savvy Resources Ltd - HongKong
- Timah Investasi Mineral - Indoneisa
- Indogreen Group - Indonesia
- Interocean Group of Companies - India
- Directorate General of MIneral and Coal - Indonesia
- Offshore Bulk Terminal Pte Ltd, Singapore
- Mjunction Services Limited - India
- Bukit Makmur.PT - Indonesia
- Global Green Power PLC Corporation, Philippines
- Singapore Mercantile Exchange
- Krishnapatnam Port Company Ltd. - India
- Barasentosa Lestari - Indonesia
- Grasim Industreis Ltd - India
- Orica Mining Services - Indonesia
- OPG Power Generation Pvt Ltd - India
- Salva Resources Pvt Ltd - India
- Ministry of Mines - Canada
- SN Aboitiz Power Inc, Philippines
- Sree Jayajothi Cements Limited - India
- Directorate Of Revenue Intelligence - India
- GVK Power & Infra Limited - India
- Bukit Asam (Persero) Tbk - Indonesia
- European Bulk Services B.V. - Netherlands
- GMR Energy Limited - India
- Thiess Contractors Indonesia
- Semirara Mining Corp, Philippines
- London Commodity Brokers - England
- Indian Energy Exchange, India
- Indika Energy - Indonesia
- Aditya Birla Group - India
- PNOC Exploration Corporation - Philippines
- Leighton Contractors Pty Ltd - Australia
- Bharathi Cement Corporation - India
- Energy Link Ltd, New Zealand
- Meenaskhi Energy Private Limited - India
- Maheswari Brothers Coal Limited - India
- Mercuria Energy - Indonesia
- MS Steel International - UAE
- Minerals Council of Australia
- Neyveli Lignite Corporation Ltd, - India
- PetroVietnam Power Coal Import and Supply Company
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Larsen & Toubro Limited - India
- Straits Asia Resources Limited - Singapore
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Gujarat Electricity Regulatory Commission - India
- Indonesian Coal Mining Association
- Latin American Coal - Colombia
- Dalmia Cement Bharat India
- Baramulti Group, Indonesia
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