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 Fixed Price Supply - a one stop solution Y P SUPPL • Allows the bunker buyer to combine buying of forward bunker requirements and hedging in one single transaction. F F 3
Who use s F F P’s Producers Refiners/ Power producers Y P SUPPL Shipping Companies/ Airlines Bunker suppliers F F Trading & Oil companies/Banks 4
What is an F F P Forward Fixed Price agreement • Provides the buyer fixed price bunker fuel:- Y • At agreed port P SUPPL • 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 F F • Avoids complex financial instruments 5
F e atur e s of F F P supply • FFP – an agreement to supply/purchase bunkers between 1 month and (in most cases) 6 months forward. • Narrowed down to a calendar month/s Y P SUPPL • 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 F F • Under lift (below 95% of FFP agreement) invokes price adjustment to compensate for any Cockett derivative/cancellation charges 6
Be ne fits of F F Ps -for the buye r • Locks in forward costs • Budget controls • For some, locks in profits Y • Avoids price volatility P SUPPL • Simple process • Avoids complex derivatives • Credit is transparent • Saves time/resources • Quantities can be phased in during times of uncertainty F • Trigger pricing F • Can be cancelled • Charges may be applicable to cancel Cockett swap 7
Conside r ations • Set objectives • Budget protection ? • Price volatility management ? • Locking in margins e.g. contract of affreightment Y P SUPPL • Determine requirements • Quantity range • Port • Consider ‘phasing in’ F • Purchase FFPs incrementally F • Hedge strategy should be ‘simple’ • Cockett offers a one stop solution 8
F F Ps ; T he Pr oc e ss • Define minimum monthly requirements in chosen ports/regions Y • Agree fixed price and any port differentials basis agreed P SUPPL quantity • Agree delivery nomination terms • Agree formula for any monthly over lift F F • Confirm agreement to Cockett FFP contract • Upon nomination: normal procedures apply 9
Eliminates uncertainty Rotterdam 380 CSt 750 Y 700 P SUPPL 650 600 Rotterdam 380 CSt 550 F F 500 10
Th a n k Y o u !
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