- Producers: They produce a kind of product that is aimed at
the bunker fuel market
- Refiners: Buy
Crude from producers or traders or brokers and process it for
specific types of Bunker Fuel-pay invoices to producers sometimes fees to
brokers.
- Brokers:
Can be in-house for buyers or service station physicals. They never hold
fuel. External brokers put Physicals together with buyer lines all around
the world who have the right fuel at the right times in the right
places-no invoices to anyone but buyers or sellers for a service.
- Physicals: Can
be service station retailers or storage facilities for traders: Always
hold fuel at one time or another. Receive and store the fuel and provide a
refueling service to the ships. They buy fuel and sell fuel if the can,
sometimes hold fuel the retail Buyer or Trader bought and charge a service
fee.
- Traders: Commodity
brokers who trade the rights of batches if fuels, Never want to pay
physical fees. They buy paper low and sell paper higher. If they get stuck
they pay storage fees to physicals.
- Buyer/Users: Shipping
lines: Buy fuels for their ships: largest companies have all of these or
at least all but physicals-pay invoices and fees if they have to.
Most buyers can only buy up stream as far as refiners.
-but the further they go up or downstream from their core
specialty, the more cost and risk they take.
Sometimes all of these groups have people that appear and even
represent themselves as brokers buyers or sellers, or even traders. Sometimes
even buyer/users will sell paper to traders if they have too much fuel in one
place when their plans change.
Conclusions:
We are Way, Way upstream. So until we become a refinery, and buy
or rent service station physicals, we will always be selling off the Spot price
for a designated fuel type.
Our best option would be to find buyers further downstream than
the refiner/blenders (Intergulf) who group together small batches of differing
fuel and sell in bulk to buyers or physicals with orders from buyers.
Our best prices will come when we fill up as many as our tanks as
possible, in a consistent time frame, and can promise, say, monthly deliveries
to a buyer with physicals. therefore,
As our consistent capacity grows, so will the price we get for our
product.
Strategy:
Short term
-Teach brokers with
downstream connections about our fuels so they are willing to shop
our product around, and who can out put us together directly with a
user/buyer.
-Explore the possibility of
developing a Futures contract with traders. Buy price will be lower price but
predictable.
Mid-Term
find someone in a port with Physicals with
steady retail buyer/users they sell directly to, who will value our low sulfur
and who mixes in their physicals. Sell it to them in sufficient quantities to
make it worth their while.
Long-term
When we have several plants producing sufficient quantities, find
one or more in-house buyer for a Buyer/User. Maintain relationships with the others so
we can sell smaller batches when we need to clear tank space.
See where the futures
contracts has gone with traders.
Challenges:
They all want to maximize their profits so all the downstream
players want to buy as far upstream as possible.
All the players sometimes represent themselves as way upstream to
their buyers, and way downstream to their product sources, so we
have to find a way to discern where they really are
But Buyer/Users, our Holy Grail client, have special needs
downstream. They need consistent volumes of highest quality, of a variety
of bunker product with the shortest turn around as possible, flexibility,
and at the right time and place for their needs.
Solutions:
- We
have to frame the right questions to our brokers and traders
- How far downstream are your regular buyers?
- Do we invoice the buyer directly?
- How do you get paid?, flat fee? percentage of sale?
- Broker A:
They will try to buy from us and sell to their customers on separate
invoices. Buyers are unprotected from our search from our search for a
relationship directly with them.
- Broker B: We want to send an invoice directly to their buyer and
pay a transparent fee. We have
to develop trust by being trustworthy with the brokers, not trying to
bypassing them, but we will develop intelligence about the entire stream,
with each new company we learn about, we will try and find new customers
unknown to the broker, but who are like they buyers they bring to us.
Broker B clients are off limits for direct engagement by us.
- Questions
for Traders: Bunker Futures are increasing lately
- Will the trader regulatory environment allow them to
buy oil from a recycler
- Are you willing to buy a futures contract from us?
- For what cost?
That’s my draft plan – any thoughts?
"Oil producers use derivative markets to lock in profits while buyers aim to protect themselves against rising prices, with liquidity further boosted by a raft of sophisticated trading strategies and speculation by investors.+
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