10/17/2018 The Changing Nature of Benchmarking - Ship & Bunker

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Home News & Features World The Changing Nature of Benchmarking

The Changing Nature Key Bunker Prices More

of Benchmarking
IFO380 MGO
$/mt +/- $/mt +/-

Singapore 509.50 3.00 734.00 5.00

by Paul Hardy, NSI
Thursday October 11, 2018 Rotterdam 464.50 3.00 700.50 0.50

Houston 462.00 0.50 748.00 2.00

Over the last decade as prices became more
Fujairah 510.00 2.00 796.00 1.00
transparent benchmarking of bunker buyers and
brokers performance was a relatively simple
View Bunker Prices in for 150 Ports
task. For the most part the focus has been on
the discount achieved to particular indexes
whether it is Platts / Ship & Bunker / Clearview or
others. Secondly, the timing of the enquiry in the
Popular Now More

market has been monitored along with claims

Positive Outlook for
ratios/operational performance of particular Paul Hardy, NSI. Image Credit: NSI Scrubbers Propping Up HSFO
suppliers.
Futures Prices
Oct 17
But the spread between HSFO and
IMO2020 will throw away the rule book when it comes to benchmarking. Firstly, prices will
0.50% sulfur gasoil is still enough for
become more opaque. We have recently seen the first attempt at pegging 0.5% Sulphur fuel oil scrubbers to make sense, says JBC
prices by Petroleum Argus whose methodology is an arbitrary blending formula. They should be Energy.

commended for attempting to bring some clarity but, we all know depending on the blending IMO 2020: Number of Vessels
components the pricing is anything but linear for future 0.5% Sulphur product. With Scrubbers Installed or
https://shipandbunker.com/news/world/802269-the-changing-nature-of-benchmarking Ordered Jumps to 1,850 1/5
 “
10/17/2018
Availability is the elephant in the room. I have The Changing Nature of Benchmarking - Ship & Bunker Oct 15 Number will "easily" reach 2,500 by
2020, says DNV GL.
written extensively about this over the past 12
months but it remains the biggest challenge. We
We move from a market Scorpio Confirms Orders for
move from a market where the products people where the products Over 140 Scrubbers
want to buy are by and large readily available, to At a cost of between $1.5-$2.2 million

one where only those with a heavily detailed plan

people want to buy are Oct 15 per vessel

can be sure they can buy what they want. by and large readily
The status quo which has seen a race to the available, to one where
bottom in terms of securing low price HSFO
only those with a
whilst maintaining service and quality at
acceptable levels is no longer viable. The issue heavily detailed plan
becomes more one of logistics and how you
can be sure they can
control the flow of a scarce resource from the
refinery to the owner's vessel. It is clear from buy what they want
discussions with owners that many have not fully
grasped this challenge. One that has is Maersk and their taking of storage to enable the smooth
logistical flow must be commended. I made a speech at the Baltic Exchange in February in
which I tongue in cheek summarized the best thing a ship owner could do was invest in bunker
barges. Whilst it was a throw away line the point was 'those in control of the logistics will be in
control of the market'.

Coming back to benchmarking I will pose a question for post IMO2020 buyers and brokers. Who
has done a better job?

1. A buyer who has secured all product at $3.00pmt under the benchmark pricing but has
only lifted 70% LSFO 0.5% and the rest MGO
2. A buyer who has bought 90% LSFO 0.5% but has averaged $2.00pmt over the
benchmark.

On the quality/compatibility side:

1. A buyer who has bought $3.00pmt under the benchmark pricing but has received a
number of compatibility issues.

https://shipandbunker.com/news/world/802269-the-changing-nature-of-benchmarking 2/5
10/17/2018
2. Thebut
A buyer who has bough $2.00pmt over the benchmark Changing Naturecompatibility
reduced of Benchmarking - Ship & Bunker

issues to a minimum.

On the jurisdiction side:

1. A buyer who has bought $3.00pmt under the market but only 60% of volume in the
main bunker hubs.
2. A buyer who has bought $2.00pmt over the market but 85% in main bunker hubs.

Lastly, a buyer with vessels fitted with scrubbers:

1. A buyer who has contracted volume in advance and secured the product at a premium
over the spot market.
2. A buyer who has beaten the benchmark on the spot but has had to buy MGO for 20%
of liftings.

Of course we all hope to both secure the product and beat the market but it might not necessarily
be possible or even preferable in certain circumstances.

The question is what does success look like? It

is clear it will be a combination of operational
planning to make sure tanks are empty, avoid
comingling risks whilst maximising liftings in the
“The question is, as
market participants
right port. This coupled with securing product in
key locations under contract, ability to hedge
what can we do to plan
such contracts and optimising use of working and optimize bunker
capital will all become more important.
strategy?
The question is, as market participants what can
we do to plan and optimize bunker strategy? At NSI our whole strategy over the last 12 months
has been to plan for the change in market conditions and we have invested time, money and
effort in our www.2020planning.com platform. We have also analyzed where our weaknesses
are in the changing environment and hired people who have the skills to raise our game. Most
notably, the recent employment of Mike Donaldson-Badger from BP Shipping and opening of

https://shipandbunker.com/news/world/802269-the-changing-nature-of-benchmarking 3/5
10/17/2018
our Dubai office. His skills are both as an expert in planningThe
andChanging Natureas
operations of Benchmarking
well as an in- Ship & Bunker

depth knowledge of the supply chain. Please contact mike@nauticalsupply.co.uk to discuss

operational planning and individual vessel strategies for IMO2020.

I believe we are best positioned to guide our clients in the future market having a unique
logistical overview, experience in planning and operations, expertise in contract structuring and
hedging and a highly skilled and extensive broking resource.

About NSI

Nautical Supply International Ltd is the largest fully

independent broking house. It has extensive experience on
the spot, term and hedging markets. It advises on short and
long term bunker strategy with a focus on compliance and
flexible pricing methods for a portfolio of blue chip clients.

Paul Hardy can be reached at paul@nauticalsupply.co.uk

To contact the editor responsible for this story email us at

editor@shipandbunker.com

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