Collector time | Traditional bunker price reports enter a new era

Zero or low carbon bunkers are essential for industry to meet IMO decarbonization targets by 2030/2050.

While some of these fuels are already available to varying degrees at major ports, they are not commercially mature as supply chains have not yet been developed in the absence of sufficient demand. Therefore, they are difficult, if not impossible, to assess at this time given the lack of spot trading activity compared to conventional fuels.

Argus already provides a series of barge and freight prices for LNG, ammonia (green and gray), biofuels and methanol in some of the world’s largest ports. Other fuels will soon be launched, such as bio methanol.

Based on their energy density, we publish the prices of alternative marine fuels in three different units: $ / metric tonne, ultra low sulfur fuel oil equivalent; $ / t marine diesel equivalent; and $ / min British thermal unit.

Thus, market players can better compare alternative prices with the prices of conventional bunkers. We will gradually introduce ad hoc and retail size assessments based on the growth of these fuels.

These are exciting times to be an award reporter because everyone seems to have to start from scratch. It’s great to be on the front lines in this regard and to witness the transformation of an entire industry on such a large scale.

Development of the Argus Marine Fuels methodology

Our spot price assessments for major bunker qualities are based on a volume weighted average (VWA) of reported transactions that are submitted by a variety of key industry participants, ranging from shipowners to bunker traders, to suppliers and brokers.

When we started applying this methodology in 2018, only a few companies were submitting transaction information. This pool has grown significantly over the years to an average of seven companies reporting around 12 transactions per day in Singapore alone.

Since the launch of our VWA methodology, other ports in Asia have joined the fray, and we now report a daily average of over 30 transactions in Fujairah, Singapore, China, Hong Kong, Japan and Japan. South Korea. Our prices, as well as our news and analysis, are closely watched by a wide range of companies in the maritime industry.

While we cannot independently verify every trade submission, we strongly believe that our price assessments closely reflect an average of where the market is trading on any given day. The more deal submissions we have, the less the rating is influenced by information from a single deal. That’s why we continually strive to expand our pool of participants.

We also use statistical methods to ensure the robustness of our assessments. The submitted transactions are subjected to statistical analysis to eliminate outliers before the volume weighted average is calculated.

We ask bidders for grade, price, quantity and delivery date per transaction, occasionally but not always with details of the counterparty. Details of transactions are kept confidential to safeguard the business interests of the business parties. With over 60 companies submitting bids, we are confident in the robustness and accuracy of our assessments.

Adapting to the future and transitory challenges of maritime transport

Going forward, we see the role of technology and big data rapidly revolutionizing the world, especially in commodity trading. There are a variety of platforms for physical and derivative trading.

In many cases, price information agencies (PRAs) like Argus use this technology, including Argus online marketplaces and permanent message boards to gauge prices. PRAs also incorporate information from derivative trading platforms such as futures exchanges into the valuation process.

I believe that given the specificity and often opaque nature of many commodity markets, including marine fuels, PRAs will continue to play a key role in terms of price discovery.

I also believe that human analysis and touch as well as a deep understanding of how the market works and relationships with market players are required to assess Dark Markets.

Total reliance on technology may not give us the solutions industry needs. This is certainly the case with bunkers, and especially now, given the uncertainties surrounding the advent of a new world of greener fuels.

For more information on Argus Marine Fuels Market Services, please click on here.

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Catriona

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