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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, 05 January 22
CHINA COAL FUTURES SURGE ON SUPPLY WORRIES AMID INDONESIA EXPORT BAN - REUTERS
China’s thermal coal futures surged by as much as 7.8per cent to kick off 2022 on concerns of supply disruptions after Indonesia, its biggest ...
Wednesday, 05 January 22
INDONESIA WARNS COAL SUPPLY CRUNCH NOT OVER AS CHINA PRICES RALLY - REUTERS
Indonesia has warned that its coal supply situation remains critical, ahead of Wednesday’s (Jan 5) review of its export ban, unnerving global ...
Tuesday, 28 December 21
INDIA'S ADANI NEARS FIRST COAL SHIPMENT FROM SHUNNED AUSTRALIAN MINE - REUTERS
India’s Adani Group ADEL.NS is preparing to ship the first coal cargo from Australia’s most controversial mine, after battling a seven- ...
Thursday, 23 December 21
COAL TO STAY AS MAJOR SOURCE OF ENERGY IN FORESEEABLE FUTURE: JOSHI - BUSINESS STANDARD
Coal will stay as a major source of energy in the foreseeable future as it is an affordable source of energy with substantial reserve, Parliament w ...
Thursday, 23 December 21
ANNUAL U.S. COAL-FIRED ELECTRICITY GENERATION WILL INCREASE FOR THE FIRST TIME SINCE 2014 - EIA
From December 20 through December 30, Today in Energy will feature some of our favorite articles from 2021. Today’s article was originally pu ...
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- Mjunction Services Limited - India
- Oldendorff Carriers - Singapore
- LBH Netherlands Bv - Netherlands
- Carbofer General Trading SA - India
- Dalmia Cement Bharat India
- Samtan Co., Ltd - South Korea
- Grasim Industreis Ltd - India
- European Bulk Services B.V. - Netherlands
- OPG Power Generation Pvt Ltd - India
- Price Waterhouse Coopers - Russia
- MS Steel International - UAE
- Iligan Light & Power Inc, Philippines
- Jindal Steel & Power Ltd - India
- CNBM International Corporation - China
- PetroVietnam Power Coal Import and Supply Company
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- IEA Clean Coal Centre - UK
- Timah Investasi Mineral - Indoneisa
- Indogreen Group - Indonesia
- Jorong Barutama Greston.PT - Indonesia
- International Coal Ventures Pvt Ltd - India
- Bukit Baiduri Energy - Indonesia
- Eastern Energy - Thailand
- SMC Global Power, Philippines
- Uttam Galva Steels Limited - India
- Maharashtra Electricity Regulatory Commission - India
- Australian Coal Association
- Rashtriya Ispat Nigam Limited - India
- TeaM Sual Corporation - Philippines
- Meralco Power Generation, Philippines
- The State Trading Corporation of India Ltd
- Coal and Oil Company - UAE
- Kapuas Tunggal Persada - Indonesia
- McConnell Dowell - Australia
- Orica Australia Pty. Ltd.
- Australian Commodity Traders Exchange
- Pipit Mutiara Jaya. PT, Indonesia
- Billiton Holdings Pty Ltd - Australia
- Chamber of Mines of South Africa
- New Zealand Coal & Carbon
- Ministry of Finance - Indonesia
- Global Coal Blending Company Limited - Australia
- Asmin Koalindo Tuhup - Indonesia
- Barasentosa Lestari - Indonesia
- Africa Commodities Group - South Africa
- Interocean Group of Companies - India
- Aditya Birla Group - India
- Vijayanagar Sugar Pvt Ltd - India
- White Energy Company Limited
- Medco Energi Mining Internasional
- Baramulti Group, Indonesia
- GAC Shipping (India) Pvt Ltd
- Star Paper Mills Limited - India
- Semirara Mining Corp, Philippines
- Globalindo Alam Lestari - Indonesia
- Formosa Plastics Group - Taiwan
- Global Business Power Corporation, Philippines
- India Bulls Power Limited - India
- Tata Chemicals Ltd - India
- Kartika Selabumi Mining - Indonesia
- Bukit Asam (Persero) Tbk - Indonesia
- Mercator Lines Limited - India
- London Commodity Brokers - England
- Cigading International Bulk Terminal - Indonesia
- Thiess Contractors Indonesia
- GVK Power & Infra Limited - India
- Parry Sugars Refinery, India
- SN Aboitiz Power Inc, Philippines
- Alfred C Toepfer International GmbH - Germany
- Ind-Barath Power Infra Limited - India
- Meenaskhi Energy Private Limited - India
- Indonesian Coal Mining Association
- Kaltim Prima Coal - Indonesia
- Wilmar Investment Holdings
- Tamil Nadu electricity Board
- Sojitz Corporation - Japan
- Rio Tinto Coal - Australia
- Heidelberg Cement - Germany
- Electricity Generating Authority of Thailand
- Sical Logistics Limited - India
- Romanian Commodities Exchange
- Essar Steel Hazira Ltd - India
- Maheswari Brothers Coal Limited - India
- Georgia Ports Authority, United States
- Power Finance Corporation Ltd., India
- Ambuja Cements Ltd - India
- CIMB Investment Bank - Malaysia
- Agrawal Coal Company - India
- Indian Energy Exchange, India
- Banpu Public Company Limited - Thailand
- Directorate Of Revenue Intelligence - India
- Edison Trading Spa - Italy
- Neyveli Lignite Corporation Ltd, - India
- Parliament of New Zealand
- Antam Resourcindo - Indonesia
- Offshore Bulk Terminal Pte Ltd, Singapore
- Altura Mining Limited, Indonesia
- Posco Energy - South Korea
- Malabar Cements Ltd - India
- Goldman Sachs - Singapore
- Wood Mackenzie - Singapore
- TNB Fuel Sdn Bhd - Malaysia
- Holcim Trading Pte Ltd - Singapore
- Energy Link Ltd, New Zealand
- Kalimantan Lumbung Energi - Indonesia
- GMR Energy Limited - India
- San Jose City I Power Corp, Philippines
- Gujarat Sidhee Cement - India
- ASAPP Information Group - India
- Petron Corporation, Philippines
- Renaissance Capital - South Africa
- Commonwealth Bank - Australia
- Makarim & Taira - Indonesia
- Kumho Petrochemical, South Korea
- Intertek Mineral Services - Indonesia
- Karbindo Abesyapradhi - Indoneisa
- Bharathi Cement Corporation - India
- Coalindo Energy - Indonesia
- Savvy Resources Ltd - HongKong
- Ministry of Transport, Egypt
- Toyota Tsusho Corporation, Japan
- Videocon Industries ltd - India
- Central Java Power - Indonesia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Riau Bara Harum - Indonesia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Independent Power Producers Association of India
- Borneo Indobara - Indonesia
- PowerSource Philippines DevCo
- Straits Asia Resources Limited - Singapore
- Therma Luzon, Inc, Philippines
- Metalloyd Limited - United Kingdom
- Electricity Authority, New Zealand
- Ministry of Mines - Canada
- ICICI Bank Limited - India
- Siam City Cement - Thailand
- Bulk Trading Sa - Switzerland
- Orica Mining Services - Indonesia
- Trasteel International SA, Italy
- Leighton Contractors Pty Ltd - Australia
- Marubeni Corporation - India
- Sinarmas Energy and Mining - Indonesia
- Eastern Coal Council - USA
- Lanco Infratech Ltd - India
- Salva Resources Pvt Ltd - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Indo Tambangraya Megah - Indonesia
- Bayan Resources Tbk. - Indonesia
- Madhucon Powers Ltd - India
- Chettinad Cement Corporation Ltd - India
- The University of Queensland
- Cement Manufacturers Association - India
- Semirara Mining and Power Corporation, Philippines
- Global Green Power PLC Corporation, Philippines
- Gujarat Mineral Development Corp Ltd - India
- Aboitiz Power Corporation - Philippines
- Kepco SPC Power Corporation, Philippines
- Pendopo Energi Batubara - Indonesia
- Mercuria Energy - Indonesia
- GN Power Mariveles Coal Plant, Philippines
- Kobexindo Tractors - Indoneisa
- Manunggal Multi Energi - Indonesia
- Binh Thuan Hamico - Vietnam
- Sree Jayajothi Cements Limited - India
- Port Waratah Coal Services - Australia
- IHS Mccloskey Coal Group - USA
- Gujarat Electricity Regulatory Commission - India
- Sakthi Sugars Limited - India
- Indian Oil Corporation Limited
- Karaikal Port Pvt Ltd - India
- Simpson Spence & Young - Indonesia
- Indika Energy - Indonesia
- Larsen & Toubro Limited - India
- PTC India Limited - India
- Merrill Lynch Commodities Europe
- Siam City Cement PLC, Thailand
- Energy Development Corp, Philippines
- Petrochimia International Co. Ltd.- Taiwan
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Standard Chartered Bank - UAE
- Mintek Dendrill Indonesia
- Krishnapatnam Port Company Ltd. - India
- Minerals Council of Australia
- Latin American Coal - Colombia
- Bhatia International Limited - India
- Kohat Cement Company Ltd. - Pakistan
- South Luzon Thermal Energy Corporation
- Bank of Tokyo Mitsubishi UFJ Ltd
- Xindia Steels Limited - India
- Jaiprakash Power Ventures ltd
- Anglo American - United Kingdom
- Singapore Mercantile Exchange
- Bangladesh Power Developement Board
- VISA Power Limited - India
- Bhoruka Overseas - Indonesia
- Thai Mozambique Logistica
- Economic Council, Georgia
- Bhushan Steel Limited - India
- Planning Commission, India
- Directorate General of MIneral and Coal - Indonesia
- Kideco Jaya Agung - Indonesia
- Ceylon Electricity Board - Sri Lanka
- Bukit Makmur.PT - Indonesia
- Deloitte Consulting - India
- SMG Consultants - Indonesia
- Vizag Seaport Private Limited - India
- Attock Cement Pakistan Limited
- Sindya Power Generating Company Private Ltd
- Coastal Gujarat Power Limited - India
- Miang Besar Coal Terminal - Indonesia
- PNOC Exploration Corporation - Philippines
- Vedanta Resources Plc - India
- Bahari Cakrawala Sebuku - Indonesia
- Sarangani Energy Corporation, Philippines
- The Treasury - Australian Government
- AsiaOL BioFuels Corp., Philippines
- Central Electricity Authority - India
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