New Bunker Trading Platforms: What Are They Doing for Buyers?

Paul Hardy, NSI

It is interesting to note a number of new platforms being developed by trading companies and brought to the market. These platforms are designed to give the buyer comfort in giving the account 'exclusively' to the trader. The key facets of them are:

• Market intelligence
• Fixed cost of credit
• Benchmarking
• Fuel quality analysis
• Transparency

On the face of it they are well packaged and an attractive option for the buyer. I would like to delve though a bit deeper into the premise surrounding them.

Market intelligence - a trader's job is to maximize profit whilst selling as close to market level as is acceptable by the buyer. This has meant in the past the buyer quite often buys at a reasonable number on the day of nomination but the real nomination day is often different to the physical supplier. As a former trader of course when we received an enquiry with suitable notice we would fix at different times to the buyer depending upon whether the market was rising or falling.

Fixed cost of credit - Let's say the buyer agrees a fixed cost of credit with the trader of $3-5.00pmt. This cost is reasonable if there are no other options available in the market. If your company is creditworthy, a broker will be able to set you up with credit lines with numerous counterparties directly at a much reduced cost. Why give away the extra? Secondly, as a buyer you are tying your liquidity to a single trader. If there is a change in view of the trading company by its banks your credit will be reduced at little or no notice. If you spread the credit between many counterparties you will end up with a more stable situation and have spare capacity for IMO2020 to take into account the price rises. Remember the trader will have to find 60% more liquidity overnight to keep servicing your account come IMO2020. By working with a broker you just need to spread the credit over wider counterparties. This avoids keeping all eggs in one basket  and allows you to spread out credit and risk. This can be done now in preparation of what is to come.

Benchmarking - This is good functionality but the devil is in the detail. How does the platform benchmark? Does it monitor differing performance for notice periods on enquiries? Does it monitor the optimum fixing time for enquiries? What index are you being benchmarking against? Does the index come from a reliable source? Is the index made known? What happens when anomalies occur? As a broker we monitor all of these and look in detail at all anomalies in terms of specs, logistics and market factors.

Fuel quality reporting - This is good functionality and useful to pick up macro trends in problems in particular regions. Of course it is a reactive system and reliant upon the test results. As brokers we often notice and report problems when they become a problem on board the vessel which is normally in advance of the product being tested for an issue.

Transparency - How do you know the numbers you are shown are the net numbers from the trader before the margin is added? Can you access the original invoice from the supplier if required? Ask the question………….if you can't it is not transparent.

Loss of control - By giving your purchasing over to a trader are you in control of which suppliers are used? When a trader is also a supplier are you sure the whole market will be covered in an objective way in a particular port where they are also physical? Why peg your reputation and liquidity to that of a 3rd party? If you are well supported by your banks and the supply market why give away control?  You are the buyer however you are invisible to the market place and your reputation is that of the trader.

So are there other options? At NSI we use the ClearLynx platform which gives the client transparency, price reporting, benchmarking and monitors claims across a broad spectrum of buyers. We chose the platform for its functionality but mainly because of the data analysis capabilities. It allows us to drill down into the data and find areas we can improve our performance. We can study enquiries in great detail in terms of timing, location, claims ratios, supplier coverage, comparison of pricing and specs etc. This in turn can be fed back to clients and we work together to improve operational efficiencies with the client.

Secondly, the Clearlynx platform is market neutral. It is not set up to 'make us look good'. It is there to report transparently on our performance and allows us to pick up on any issues immediately.

When comparing a trader's platform and one like ClearLynx there is an obvious difference i.e. cost. The trader will roll the cost of the platform into their $3-5.00pmt. The independent platform will charge a fee for using it. NSI can though offer you a separate option. NSI will fund the independent platform for you and include the cost in our standard broking fee. That way you can:

• Have access to an independent platform
• Benchmark our joint performance
• Monitor our performance as brokers
• Automate end of month reporting
• Monitor  claims ratios of particular suppliers
• Monitor quality with integration to labs – know density differentials instantly
• Open your business to wider credit channels
• Save significant money over using a traders platform by reducing the cost of credit

In summary, there is good tech on the market both from trader and independent sources. In order to fully evaluate it is important to consider the independence of the platform and the underlying costs associated. At NSI we choose to use a platform that has transparency at its heart and can be used to improve our business performance. So if you would like a first class broking service and a platform with full visibility and transparency for the cost of a standard broking commission please let me know.