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Cockett M arine Oil Group | web www.cockettgroup.com
Fuel price volatility
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F F P SUPPL Y
500 550 600 650 700 750
Rotterdam 380 CSt
Rotterdam 380 CSt
Fo rw a rd Fix e d Pric e ( FFP) s u p p ly Cockett M arine Oil - - PowerPoint PPT Presentation
Fo rw a rd Fix e d Pric e ( FFP) s u p p ly Cockett M arine Oil - - PowerPoint PPT Presentation
Fo rw a rd Fix e d Pric e ( FFP) s u p p ly Cockett M arine Oil Group | web www.cockettgroup.com Fuel price volatility Rotterdam 380 CSt 750 Y 700 P SUPPL 650 600 Rotterdam 380 CSt 550 F F 500 2 What is F F P Supply Forward
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SLIDE 3
What is F F P Supply
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Forward Fixed Price Supply - a one stop solution
- Allows the bunker buyer to combine buying of forward
bunker requirements and hedging in one single transaction.
F F P SUPPL Y
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Who use s F F P’s
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Refiners/ Power producers Shipping Companies/ Airlines Trading & Oil companies/Banks Bunker suppliers Producers
F F P SUPPL Y
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What is an F F P
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Forward Fixed Price agreement
- Provides the buyer fixed price bunker fuel:-
- At agreed port
- During agreed forward period (usually a month)
- For agreed quantity (for either single or multiple stems)
- Simple process for buyer, provides risk management for any
percentage of bunker requirements
- Avoids complex financial instruments
F F P SUPPL Y
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F e atur e s of F F P supply
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- FFP – an agreement to supply/purchase bunkers between 1 month and
(in most cases) 6 months forward.
- Narrowed down to a calendar month/s
- An agreed fixed quantity during the month
- E.g., for 700-900mts stem in January, FFP would be 700mts.
Incremental quantity can be negotiated closer to delivery or priced on formula.
- Buyer may elect to phase in, i.e., lock in 300mts today, wait for balance
- FFP contract supports each transaction
- Under lift (below 95% of FFP agreement) invokes price adjustment to
compensate for any Cockett derivative/cancellation charges
F F P SUPPL Y
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Be ne fits of F F Ps -for the buye r
- Locks in forward costs
- Budget controls
- For some, locks in profits
- Avoids price volatility
- Simple process
- Avoids complex derivatives
- Credit is transparent
- Saves time/resources
- Quantities can be phased in during times of uncertainty
- Trigger pricing
- Can be cancelled
- Charges may be applicable to cancel Cockett swap
F F P SUPPL Y
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Conside r ations
F F P SUPPL Y
- Set objectives
- Budget protection ?
- Price volatility management ?
- Locking in margins e.g. contract of affreightment
- Determine requirements
- Quantity range
- Port
- Consider ‘phasing in’
- Purchase FFPs incrementally
- Hedge strategy should be ‘simple’
- Cockett offers a one stop solution
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F F Ps ; T he Pr
- c e ss
F F P SUPPL Y
- Define minimum monthly requirements in chosen
ports/regions
- Agree fixed price and any port differentials basis agreed
quantity
- Agree delivery nomination terms
- Agree formula for any monthly over lift
- Confirm agreement to Cockett FFP contract
- Upon nomination: normal procedures apply
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Eliminates uncertainty
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F F P SUPPL Y
500 550 600 650 700 750
Rotterdam 380 CSt
Rotterdam 380 CSt
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