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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, 23 December 21
COAL DEMAND TO PEAK IN INDIA BY 2030, WILL BACK UP RENEWABLES: NITI REPORT - BUSINESS STANDARD
Coal will remain India’s mainstay energy source and the country will shape global demand this decade, two reports have said a month after the ...
Thursday, 23 December 21
INDONESIA’S 2022 COAL OUTPUT SEEN BETWEEN 637 MLN-664 MLN T- OFFICIAL - REUTERS
Indonesia’s 2022 coal output is estimated at between 637 million to 664 million tonnes based on production plans currently being finalised, s ...
Thursday, 23 December 21
VALE ANNOUNCES THE SALE OF ITS COAL ASSETS
Vale informs that, on this date, it has entered into a binding agreement with Vulcan to sell the Moatize coal mine and the Nacala Logistics Corrido ...
Thursday, 23 December 21
INDIA: CAPTIVE POWER PRODUCERS URGE GOVT TO ENSURE NORMAL COAL SUPPLIES - PTI
A captive power producers’ association has urged the government for 100 per cent normalisation of coal supply to captive power producers whil ...
Thursday, 23 December 21
MARKET INSIGHT - INTERMODAL
As an outstanding year for the dry bulk freight market comes to a close, so does a thriving year for the SnP market which can only be compared to 2 ...
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- Vijayanagar Sugar Pvt Ltd - India
- Sree Jayajothi Cements Limited - India
- Orica Australia Pty. Ltd.
- TNB Fuel Sdn Bhd - Malaysia
- Kumho Petrochemical, South Korea
- Economic Council, Georgia
- Gujarat Sidhee Cement - India
- GN Power Mariveles Coal Plant, Philippines
- Power Finance Corporation Ltd., India
- Indian Oil Corporation Limited
- Ministry of Finance - Indonesia
- European Bulk Services B.V. - Netherlands
- Grasim Industreis Ltd - India
- Sojitz Corporation - Japan
- Bank of Tokyo Mitsubishi UFJ Ltd
- GMR Energy Limited - India
- Chamber of Mines of South Africa
- SN Aboitiz Power Inc, Philippines
- Simpson Spence & Young - Indonesia
- London Commodity Brokers - England
- Merrill Lynch Commodities Europe
- Siam City Cement PLC, Thailand
- Savvy Resources Ltd - HongKong
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Indian Energy Exchange, India
- Bukit Baiduri Energy - Indonesia
- Asmin Koalindo Tuhup - Indonesia
- Oldendorff Carriers - Singapore
- Salva Resources Pvt Ltd - India
- Indo Tambangraya Megah - Indonesia
- Maheswari Brothers Coal Limited - India
- CNBM International Corporation - China
- Central Java Power - Indonesia
- Antam Resourcindo - Indonesia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Interocean Group of Companies - India
- Australian Commodity Traders Exchange
- Directorate Of Revenue Intelligence - India
- Bahari Cakrawala Sebuku - Indonesia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- White Energy Company Limited
- Mercator Lines Limited - India
- Kaltim Prima Coal - Indonesia
- Anglo American - United Kingdom
- India Bulls Power Limited - India
- Baramulti Group, Indonesia
- New Zealand Coal & Carbon
- Eastern Energy - Thailand
- Therma Luzon, Inc, Philippines
- Pipit Mutiara Jaya. PT, Indonesia
- Eastern Coal Council - USA
- Jorong Barutama Greston.PT - Indonesia
- Minerals Council of Australia
- Kobexindo Tractors - Indoneisa
- Deloitte Consulting - India
- OPG Power Generation Pvt Ltd - India
- Carbofer General Trading SA - India
- Romanian Commodities Exchange
- The University of Queensland
- Aditya Birla Group - India
- Altura Mining Limited, Indonesia
- Bangladesh Power Developement Board
- Borneo Indobara - Indonesia
- Lanco Infratech Ltd - India
- Meralco Power Generation, Philippines
- Iligan Light & Power Inc, Philippines
- Coastal Gujarat Power Limited - India
- Xindia Steels Limited - India
- Renaissance Capital - South Africa
- Electricity Generating Authority of Thailand
- Vizag Seaport Private Limited - India
- Global Business Power Corporation, Philippines
- Gujarat Electricity Regulatory Commission - India
- Sindya Power Generating Company Private Ltd
- Energy Development Corp, Philippines
- Dalmia Cement Bharat India
- CIMB Investment Bank - Malaysia
- Barasentosa Lestari - Indonesia
- Ceylon Electricity Board - Sri Lanka
- Global Coal Blending Company Limited - Australia
- Banpu Public Company Limited - Thailand
- Formosa Plastics Group - Taiwan
- Central Electricity Authority - India
- Standard Chartered Bank - UAE
- PNOC Exploration Corporation - Philippines
- Straits Asia Resources Limited - Singapore
- VISA Power Limited - India
- Bhoruka Overseas - Indonesia
- Marubeni Corporation - India
- Petron Corporation, Philippines
- Parliament of New Zealand
- Independent Power Producers Association of India
- MS Steel International - UAE
- Edison Trading Spa - Italy
- Chettinad Cement Corporation Ltd - India
- Essar Steel Hazira Ltd - India
- Madhucon Powers Ltd - India
- Krishnapatnam Port Company Ltd. - India
- Kapuas Tunggal Persada - Indonesia
- Orica Mining Services - Indonesia
- Ind-Barath Power Infra Limited - India
- AsiaOL BioFuels Corp., Philippines
- Bhushan Steel Limited - India
- Semirara Mining and Power Corporation, Philippines
- Bukit Makmur.PT - Indonesia
- Commonwealth Bank - Australia
- Medco Energi Mining Internasional
- Jindal Steel & Power Ltd - India
- Indogreen Group - Indonesia
- Sinarmas Energy and Mining - Indonesia
- Bhatia International Limited - India
- Trasteel International SA, Italy
- Posco Energy - South Korea
- Bulk Trading Sa - Switzerland
- Offshore Bulk Terminal Pte Ltd, Singapore
- Kalimantan Lumbung Energi - Indonesia
- Kepco SPC Power Corporation, Philippines
- PetroVietnam Power Coal Import and Supply Company
- Globalindo Alam Lestari - Indonesia
- Mercuria Energy - Indonesia
- Tata Chemicals Ltd - India
- Parry Sugars Refinery, India
- SMC Global Power, Philippines
- Cement Manufacturers Association - India
- Meenaskhi Energy Private Limited - India
- Australian Coal Association
- Mjunction Services Limited - India
- Neyveli Lignite Corporation Ltd, - India
- International Coal Ventures Pvt Ltd - India
- Singapore Mercantile Exchange
- Coalindo Energy - Indonesia
- Leighton Contractors Pty Ltd - Australia
- Karaikal Port Pvt Ltd - India
- Makarim & Taira - Indonesia
- Price Waterhouse Coopers - Russia
- Pendopo Energi Batubara - Indonesia
- Sakthi Sugars Limited - India
- Manunggal Multi Energi - Indonesia
- Gujarat Mineral Development Corp Ltd - India
- Kohat Cement Company Ltd. - Pakistan
- Mintek Dendrill Indonesia
- SMG Consultants - Indonesia
- Vedanta Resources Plc - India
- Alfred C Toepfer International GmbH - Germany
- Billiton Holdings Pty Ltd - Australia
- Tamil Nadu electricity Board
- Samtan Co., Ltd - South Korea
- IHS Mccloskey Coal Group - USA
- Energy Link Ltd, New Zealand
- Bayan Resources Tbk. - Indonesia
- Directorate General of MIneral and Coal - Indonesia
- Bukit Asam (Persero) Tbk - Indonesia
- Petrochimia International Co. Ltd.- Taiwan
- Cigading International Bulk Terminal - Indonesia
- Star Paper Mills Limited - India
- Planning Commission, India
- Bharathi Cement Corporation - India
- Indika Energy - Indonesia
- Binh Thuan Hamico - Vietnam
- IEA Clean Coal Centre - UK
- Malabar Cements Ltd - India
- Aboitiz Power Corporation - Philippines
- San Jose City I Power Corp, Philippines
- Jaiprakash Power Ventures ltd
- Karbindo Abesyapradhi - Indoneisa
- Maharashtra Electricity Regulatory Commission - India
- The State Trading Corporation of India Ltd
- Port Waratah Coal Services - Australia
- ICICI Bank Limited - India
- GAC Shipping (India) Pvt Ltd
- Riau Bara Harum - Indonesia
- Larsen & Toubro Limited - India
- Intertek Mineral Services - Indonesia
- Kideco Jaya Agung - Indonesia
- Ministry of Transport, Egypt
- PowerSource Philippines DevCo
- Semirara Mining Corp, Philippines
- Coal and Oil Company - UAE
- Sarangani Energy Corporation, Philippines
- ASAPP Information Group - India
- Thiess Contractors Indonesia
- Uttam Galva Steels Limited - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- South Luzon Thermal Energy Corporation
- Metalloyd Limited - United Kingdom
- Thai Mozambique Logistica
- McConnell Dowell - Australia
- Rashtriya Ispat Nigam Limited - India
- Siam City Cement - Thailand
- Wilmar Investment Holdings
- Videocon Industries ltd - India
- Latin American Coal - Colombia
- PTC India Limited - India
- Rio Tinto Coal - Australia
- Timah Investasi Mineral - Indoneisa
- Kartika Selabumi Mining - Indonesia
- Ministry of Mines - Canada
- Wood Mackenzie - Singapore
- Attock Cement Pakistan Limited
- GVK Power & Infra Limited - India
- Goldman Sachs - Singapore
- Electricity Authority, New Zealand
- Miang Besar Coal Terminal - Indonesia
- Ambuja Cements Ltd - India
- Indonesian Coal Mining Association
- Global Green Power PLC Corporation, Philippines
- Sical Logistics Limited - India
- The Treasury - Australian Government
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Georgia Ports Authority, United States
- Toyota Tsusho Corporation, Japan
- Agrawal Coal Company - India
- Holcim Trading Pte Ltd - Singapore
- Africa Commodities Group - South Africa
- Heidelberg Cement - Germany
- TeaM Sual Corporation - Philippines
- LBH Netherlands Bv - Netherlands
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