INSIDER INSIGHT: Happy Friday. Or, How to Maximize Your Margin as a Trader

by The Industry Insiders
Monday February 1, 2021

'Happy Friday!' starts the trader's email. 'Oh I do hate that phrase' says a colleague. Put an extra dollar on their price for me would you' they continue.

A read though their email reveals a succinct 30 mt enquiry for MGO via truck next Monday which finishes with the line, "please advise if seen from others". A harmless little phrase to end their email it would seem. Sure! What's the harm? I mean I know we don't do that much business with this company but the young trader is doing his best, and it doesn't cost me if I tell them they're flying solo on this enquiry?

I send our price on email purposely omitting to answer his simple request and my hand readies by the phone. The small smug feeling of my brilliant foresight passes as the trader has indeed called and says happy Friday to me (again), thanks me for my price which is the lowest he's received (you're welcome), and asks whether I have seen this same enquiry from other sources (no). I say no we haven't and leave it at that.

Now, we're all in this business to make money; traders, suppliers and ship owners alike. In learning that his price from us is practically exclusive, he now has the opportunity to not only make his usual few dollar margin but allows him to price right up to the next cheapest supplier.

Say the other supplier has quoted another trader much higher for the same enquiry, we've now given our trader a lucrative advantage. Suppose he normally puts on a $5/mt margin but supplier B is quoting $15/mt higher than ourselves. This allows our trader friend to put on a $14/mt profit and still be confident he is coming in cheaper than any of his other competitors. Easy money it may be but what's to say this doesn't happen for stems much larger than 30mt of MGO when the scale gets higher?

The trader will savour his bottle of Budweiser after work and who can blame him. But what for his client? They have got the bunkers for their vessel, have covered the market and believed to have a competitive price having shrewdly shown the enquiry to more than one trading company.

Now, had they had Big Brother's powers of observing each trader and their dialogue with each supplier would they be still be content with one trader maximising profit knowing the other trader had not fully covered the market?

The trader is most certainly doing nothing wrong in the eyes of his employer and we as the supplier were only helping a trader out with an honest piece of information.

The client meanwhile might not have such a happy Friday as they ponder their choice of bunker traders.

About The Industry Insiders

We have worked around Europe, the US and the far east for physical bunker suppliers and with trading firms. As traders we have had opportunities to be poacher turned gamekeeper and work as bunker purchasers. As suppliers we never minded too much when buyers asked the all too familiar 'would you take a dollar off your price if I gave you the order?’ The truth is we all have enjoyed the negotiation, the people and this bunker industry too much. However, what we are less enamoured by are the repeated mistakes from buyers, traders and suppliers and the lack of lesson learning. We hope to share with you some of our insights and hopefully ruffle a few feathers.

Views expressed do not necessarily reflect those of Ship & Bunker, or any companies mentioned in, or connected with this article.

To contact the editor responsible for this story email us at editor@shipandbunker.com