July 2021 — blkcommodities.com

How BLK Assesses Cost

Beyond the common financial background checks

Quality – Cost – Service Delivery are the foundations of our Rating Criteria.

Here’s how we specifically assess “Cost”.

A supplier background check must go beyond the mere credit report, which is readily available for the vast majority of the business anyway and does not give a true reflection on the actual operational profile of a company.

Standard credit reports fall very short of evaluating a business’ quality, its positioning in relation to cost and, most importantly, service delivery.

For this reason, BLK has developed a proprietary evaluation method, currently used as a reference standard within the commodity trading and chemical manufacturing industries and validated on hundreds of clients already.

The BLK Rating, which covers in detail not only financials but Quality, Cost and Service Delivery, with a deep scrutiny on companies’ environmental footprint as well, paints a comprehensive picture of a business’ real position and capabilities.

In this article, we’ll look specifically at how BLK assesses Cost to build the overall company rating.

Cost is a mix of multiple factors. It’s not merely “how expensive (or cheap) is the specific product (or quote)”. It’s about a business’ overall approach to pricing and its positioning in respect to that.

1. Average gross margin

The first item we look at when evaluating cost is the company’ average gross margin in the past 3 years. This gives a good indication on whether the company falls within the average for the industry, above or below, and in which quartile.

An average, constant gross margin in the bottom quartile, means that the company is positioned aggressively in respect to pricing and therefore not only the specific product, but their whole range is likely to be competitive in absolute terms.

2. Price vs platform

It is also important to look at the price of the specific commodity compared to those of other suppliers on BLK.

We pride ourselves of being the “Online Spot Market” and as such we drive strong price competition from vetted suppliers all over the world. A company’s price may be competitive for a specific country but fall short when compared to that of overseas competitors.

We take into account the global landscape, giving buyers a feel of how the supplier stacks up internationally.

3. Average price vs index

To complement that, we also compare the specific price of goods to that of the commodity index (whenever applicable).

This way, we get the full picture, not only via the benchmark with the rest of the private market but with the institutional one as well, comparing the BLK supplier rates’ with those achieved by the movers of huge volumes such as investment banks and blue chip trading houses.

4. Credit Terms

It’s not just about “how much does it cost” but also “how much flexibility do I have for my payment”.

Suppliers that offer credit terms and payments in instalments as opposed to pre-payment only, are ranked higher than those who don’t.

BLK acts with a buyer-centric approach and the easier supplier make for a buyer to purchase, the higher it speaks of their credibility and cost positioning.

5. Price for Specific Order

Finally, we look at the specific quote or price and evaluate it with our team of expert category managers who assign a rating on the basis of their expertise in the international landscape, market conditions and supply-demand knowledge at the specific point in time.

6. Fixed vs Variable Cost Ratio

The ratio between fixed and variable costs for the company gives an indication of how heavy the company’s specific cost base is (in relation to their cost of sales). If the Fixed/Variable costs ratio is relatively low, it underpins a strong dependance from raw materials and possibly a conservative approach to margin.

These are indicators that the company tends to be more competitive than average, and the benchmark with the index and platform average prices for the same commodity, give the full assessment on how aggressive on pricing the supplier actually is.

To find out more on how we assess quality, check out our detailed post.

Do you want to get a free assessment of your company to understand how you position in respect to Quality, Cost, Service Delivery and how you stack-up against your direct competitors?

BLK Shipping Weekly – Shipping Rates Updates

16 JULY 2021

Welcome to BLK Shipping Weekly, our Shipping Rates Updates. In this issue, we’ll be covering:

Wet Cargo
Dry Cargo
Containers
Gas

Subscribe to our newsletter to stay up-to-date with our Shipping Weekly and follow us on Facebook and LinkedIn to never miss an update.

Curious of how the shipping rates evolved? Check out our previous article.

Wet Cargo

The increasing price of crude oil has been driving the tankers’ charter rates up throughout July, although this has now slowed down and we are seeing a stabilisation of the tanker rates.

VLCC – Very Large Crude Carriers remained pretty much stable. Although we’re still unbelievably far from 2019 levels, we can now see positive signs of pick-up. Outlook: Stable

Suezmax – rates remained still, apart for a few routes where we saw a near 100% growth. As the oil price stabilises, we expect that the vessel charter rates will go with it. Outlook: Stable

Aframax – afra rates more lost ground, with a general weakening across most routes. Outlook: Stable

Dirty Products – July continued to be busy in the Mediterranean, whilst remained weak in the US Gulf. Outlook: Stable.

Clean Products – Charter rates strengthened across the board primarily driven by the increase of fuel prices and re-opening of most countries in Europe and North America. Outlook: Positive

MR – uptake in demand did not have the expected positive effects on MR rates, owing to the oversupply of carrying capacity in the market. Not huge gains for MRs although a general positive feeling in the market. Outlook: Stable

LR1 – demand for log-range tankers grew significantly. Further climb looks likely as demand for refined products on each side of the Atlantic grows. Outlook: Positive

LR2 – Strong rally for LR2 tankers, up to 160% surge in a week. Outlook: Positive

Handy – Handy earnings slipped below $3000/day as the larger size vessels rallied. Outlook: Stable

Dirty Panamax – Rates continued softening very slightly on all routes, with a general 1% – 5% drop since last week. Outlook: Stable

Dry Cargo

Slow-down on most routes and across all segments, with the exception of handy bulkers.

Capesize – Capes declined between 9 to 15%, having broken through the $30k/day for the first time in years and now finding resistance to a further growth they are now back in the $23k region. Outlook: Stable

Panamax – slight decrease in demand impacted negatively the charter rates, with an average reduction of 10%. Hold availability shortage played a major role, in off-setting a larger fall, with average rates just below $30k. Outlook: Stable

Supramax – Supramaxes lost ground in recent days, after climbing steadily over the course of 2021. The second half of July saw a reduction of 4-7% to settle on an average of $26k/day Outlook: Stable

Handysize – rates continued their upward trend breaking past the $30k/day mark. Outlook: Positive

Container

Container rates did not slow down in July with further increases up to 75% past $100k/day mark for Neo-panamax vessels. As container liners keep stashing cash on the back of the strongest year on record, we are seeing the newbuilding order book starting to fill-up for the year ahead.

We are now seeing more ship owners ordering new tonnage, predominantly ultra-large carriers, LNG fuelled like CMA CGM or methanol-propelled, like Maersk.

More, new carrying capacity is set to enter the market, which should contribute to the softening of the rates. The entrance in service of these vessels is, however, still many months away and demand for containers still looks strong.

On the raw materials side, however, and especially in chemical commodities, the high freight rates (now looking upwards of $18,000 per TEU on the route China – Europe) now impact prices of goods to the extent that it is equivalent or cheaper to source from European suppliers.

We expect to see a continual decrease in smaller-batches shipments westbound from Asia to Europe, hopefully accompanied by a subsequent easing of the TEU rates towards the end of the year.

Outlook: Positive

Gas

Rates for Gas Carriers declined slightly, with the biggest hit suffered by for large carriers 145,000 m3 and above. Pressurized and semi-pressurized vessel rates remained constant.

This was expected as plenty of tonnage was tied-up in dock for ballast water treatment systems installation and is now slowly coming back into the market, increasing overall supply. Outlook: Stable

To learn more about how we can support your business shipping as cheaply and environmentally-friendly as possible, visit us at BLK.

Subscribe to our newsletter to stay up-to-date with our weekly shipping updates.

Negotiation Skills: Managing Supplier Relationships in the APAC Region

Learn how to effectively negotiate across cultures, with a specific focus on Asia Pacific.

In this article, we’ll be looking at:

1. Body Language

2. Saying «No»

3. Cultural Differences

4. Trading Variables aka Bargaining Chips

5. How to Successfully Prepare for the Negotiation

6. Buying Tactics

7. Negotiator Rulebook

Here’s a very effective, 30 minute video to learn all you need to know about negotiation, managing relationships with stakeholders in the Asia Pacific Region and always achieve the most successful outcomes from a negotiation.

Negotiation Skills: Managing Supplier Relationships in the APAC Region – BLK Webinar Series

Body Language

93% of communication is non-verbal.

Although we pride ourselves to be rational animals, the vast majority of communication in humans occurs on a subconscious level. What we actually say only counts for a tiny percentage. What really matters is what we do while we say it and how you say it.

This is a hugely important consideration, because it means that, in general, we are disadvantaged in a virtual world.

Now that most meetings have moved online there is no longer that safe space and time outside the boardroom to build a rapport, get to know the other party, get a feeling on their body language. This has strong implications.

No informal space – where trust and connection is established the easiest

Easier to say NO – conversation is less divergent

Lack of physical interaction and coordination – people become more risk averse and conservative

Common mistakes

Let’s look at the common mistakes most people make in a virtual setting.

Avoiding silence – people find virtual silence uncomfortable (silence can be useful)
Not clarifying constraints and assumptions – leads to misunderstanding and lack of trust
Not setting an agenda and managing expectations – surprises are usually not welcome if opposing side is not prepared
Lack of awareness on culture difference – be aware of cultural influence, communication styles, and boundaries

How to successfully negotiate virtually

Connect at the outset and manage expectations

Set the scene by sending the agenda to align on expecations, set up the meeting so you stay in control. Note there is less patience and time to work together

Create informal moments

Ensure everyone has a face and know their background. Use this time to build a connection

Clarify constraints and assumptions

Leave no room for any misunderstanding. Ask more questions and take lead in sharing interests. This helps others reveal more information and gain more trust

Smile

A smile goes a long way to prevent negative facial expressions on screen, and gives the perception that you are more welcoming

“Zoom” fatigue

Meeting fatigues are real, so direct viewers gaze to where they should look, grab audience attention through emotions and movement, and keep meetings short and introduce breaks.

Touch base after the meeting

Send an email or a note summarizing what was discussed/ agreed to ensure everyone is on the same page

Saying “No”

In a face to face negotiation, we must be very mindful of the other party’s cultural background and accept that we may actually stimulate a positive outcome by allowing the other person to say “no.

This is because someone saying “no” feels more protected as well as feeling in need to now give back to the other party. This makes them more open to listen and reach a positive outcome.

Use the “no” to your advantage and prompt a “no” from the other party precisely when you want them to pay more attention to what you have to say next to then drive a positive response.

Face to face negotiation

People are generally more empathetic and more open to finding a common ground, because there is a possibility for more trust and understanding
People are more emotionally alert so tactics such as Mirroring, 3 Yes Rule, and Pacing are more effective
Cultural difference is more prominent, so it is important to be aware cultural differences and knowing how to build the cultural gap

Let’s look at some practical examples of cultural divergences.

Eye contact in UK, US, Europe is a sign of strength, while eastern countries like Japan can be deemed impolite, and middle east as uncomfortable (if working across genders)
Acknowledging hierarchy is a formal rule in Asia. Therefore, where you sit speaks volumes, unlike less hierarchical cultures such as Canada, Sweden, or Britain
Time is important in some cultures, where being late is considered unprofessional, while other cultures like Spanish, Arab, or Nigerians is considered normal

Trading Variables aka Bargaining Chips

Before arriving at the negotiating table, plan in advance everything you want to take away from the other party and every chip you can put on the table in exchange.

Trading variable can be classed according to four macro categories.

Here are some examples of the main trading variables:

•Price discounts

•Volume discounts

•Total business discount (volume rebates)

•Credit terms

•Payment in instalments

•Extras / add-ons / giveaways

•After sales services

•Specification / quality

•Period over which prices are guaranteed

Preparing for the negotiation

It is good practice to lay down all of your trading variables ahead of the negotiation.

#Rank each variable in order of importance to you (e.g. does it matter more quality, cost, speedy service, etc.)

For each variable, set out a clear range or playing field. What is the best case scenario you aim to take away? What is the worst case, where do you draw the line beyond which you walk away?

Doing this for each and every variable on the table will allow you to be much better prepared and know exactly how much room for compromise you have for every item.

Ask questions. Find out what is the perceived value for each variable from the other party. Always try and give away variables which are low cost to you but perceived as high-value from the other party.

Monetise. How much is each variable worth to the other party? By asking the right question you’ll be able to assign a monetary value to each item. Giving a specific price tag to every variable will help you quantifying how much value you’re adding for your counterpart.

Buying Tactics

Here are some of the most effective buying tactics you can apply.

The Dutch Auction

An open comparison of two or more competitors, often with the competitors sitting in front of one another! This usually translates into a downward auction where each competitor tries to openly undercut the others.

The Budget Bluff

“I really want what you are offering, but this is all I have in my budget so I cannot afford any more…”

The Competitor Quote

“I had more competitive quotes than yours so if you cannot drop your price I will have to go with someone else”

The best friend

Pretending to be friends and leveraging the relationship for a better price.

The future promise

If you give me a really good deal on this first small order I will get you more business in the future.

The Stall

Buyer pretending to be in no rush to find a deal. Remember, in every negotiation one of the parties is always under time pressure. The more the clock ticks, the more they’ll be inclined to making concessions. If the one not having a time constraint is not you… happy days!

Buy Now bargain later

If you are the guy with a time pressure… well this trick may just do for you.

“Given that we have come so far, why don’t you start processing my order and we can sort out the minor details later?”

Negotiator’s Rulebook

Never ever give something away for free. For every variable you concede, get something back from the other party.
When making a concession, ensure it is always a low-cost / high-value variable.
Always act in good faith. Adopt a collaborative approach from the onset. Remember this is business, we’re all in it to achieve a positive outcome. Let’s clarify what is the other party wants to achieve beyond the single transaction. Let us approach the negotiation with (almost) all our cards on the table and let’s invite the other party to do the same. Only then we’ll have visibility of what the other party wants to achieve and we can work together towards a WIN-WIN outcome.

Do you want to learn how to be as effective as possible in purchasing for your business?

Find out more about BLK Supply Chain

BLK Shipping Weekly – Shipping Rates Updates

04 JULY 2021

Welcome to BLK Shipping Weekly, our update from the shipping market. In this issue, we’ll be covering:

Wet Cargo
Dry Cargo
Containers
Gas

Subscribe to our newsletter to stay up-to-date with our Shipping Weekly and follow us on Facebook and LinkedIn to never miss an update.

Wet Cargo

The increasing price of crude oil has been driving the tankers’ charter rates up, with significant boom this week, especially for the Black Sea – Med routes. The barrel price above $75, caused 500%+ surges specifically on the medium-sized parcels.

VLCC – Very Large Crude Carriers rallied 100% WoW, growing with the positive sentiment around oil price. The Spot rates pretty much doubled, from $600/day to $1200/day. Although we’re still unbelievably far from 2019 levels, we can now see positive signs of pick-up. Outlook: Stable

Suezmax – rates boomed, growing on average 30% WoW, with some routes seeing a 5 times increase. As the oil price keeps surging, we expect a positive impact on the vessel charter rates coing forward. Outlook: Positive

Aframax – afra rates more than doubled on the back of the positive oil prices news last week. Current rates fixed above $10600/day. Outlook: Positive

Dirty Products – July began with a relatively stable outlook, particularly busy in the Mediterranean, particularly weak in the US Gulf. Outlook: Stable.

Clean Products – Charter rates weakened between 3 to 60% owing to the fact that most world refineries are still operating under capacity due to the low demand for refined fuels. With airlines still down and road traffic at a fraction of the pre-pandemic levels the market remains far from its best shape. Plenty of carrying capacity available on the main routes contributes to weakening the outlook. Outlook: Stable

MR – uptake in demand did not have the expected positive effects on MR rate, owing to the oversupply of carrying capacity in the market. Overall down on average 25%, settling at $3800/day.. Outlook: Stable

LR1 – demand for log-range tankers remains low. Slow pick-up is possible depending on the easing of lockdowns and demand for refined products on each side of the Atlantic. Outlook: Stable

LR2 – In general, the market remains down between 3% and 5%. Slightly better than the previous week, although far from 2020 peak performance. Outlook: Stable

Handy – As anticipated last week, with LR and MR tanker rates below those of Handy tankers, charterers have been shifting to larger vessel sizes, wherever possible. This led to a hit in the region of 10% to Handy rates, with an additional slight drop still possible until break even or below is reached. Currently at $3800/day. Outlook: Stable

Dirty Panamax – Rates continued softening slightly on all routes, with a general 15% drop since last week, among fears of a new COVID wave due to the delta variant. Outlook: Stable

Dry Cargo

General pick-up on all routes and across all segments, underpinning a strong market sentiment, driven by the increasing demand for raw materials.

Capesize – Capes remained relatively stable, having broken through the $30k/day for the first time in years and now finding resistance to a further growth. Outlook: Stable

Panamax – slight increase in demand impacted positively the charter rates, with another 7% weekly growth. Hold availability shortage played a major role, with charter rates now surpassing $3500/day on certain routes. Outlook: Stable

Supramax – rates climbing steadily over the course of 2021 and stabilised in May to pick-up again more aggressively in June, with a 20% average growth WoW. The first days of July saw a stabilisation of this trend, with a flatter growth curve, rising by an average of 7% WoW to settle on an average of $27k/day Outlook: Positive

Handysize – rates continued their upward trend breaking past the $27k/day mark. Outlook: Positive

Container

Container rates did not slow down starting July with a further 5-6% increase. Now nearing the $100k/day mark for Neo-panamax vessels too. As container liners keep stashing cash on the back of the strongest year on record, we are seeing the newbuilding order book starting to fill-up for the year ahead.

We are now seeing more ship owners ordering new tonnage, predominantly ultra-large carriers, LNG fuelled like CMA CGM or methanol-propelled, like Maersk.

On the raw materials side, however, and especially in chemical commodities, the high freight rates (now looking upwards of $15,500 per TEU on the route China – Europe) now impact prices of goods to the extent that it is equivalent or cheaper to source from European suppliers.

We expect to see a continual decrease in smaller-batches shipments westbound from Asia to Europe, hopefully accompanied by a subsequent easing of the TEU rates towards the end of the year.

Air cargo is now cheaper than ocean freight for smaller parcels, are we on the tipping point for this huge container rally?

Outlook: Positive

Gas

Rates for Gas Carriers remained relatively stable, with a small growth for large carriers. Pressurized and semi-pressurized vessel rates remained constant.

As plenty of tonnage is currently tied-up in dock for ballast water treatment systems installation, we are to expect a softening of the rates next month, as the ships come back into the market.
Outlook: Stable

To learn more about how we can support your business shipping as cheaply and environmentally-friendly as possible, visit us at BLK.

Subscribe to our newsletter to stay up-to-date with our weekly shipping updates.

Shipping rates updates

Every Friday on BLK.

BLK Marketplace – Growth and Distribution of Underlying Assets

An Overview of the World’s First Commodity Marketplace Rapid Growth

BLK MVP launched in September 2019. Let’s take a look at how the marketplace has evolved by analysing its stock and value growth over the past 2 years.

The Humble Beginnings

The second half of 2019 was a game of chicken and egg. Which comes first?

We decided that in order to drive demand on our marketplace, supply had to be there first. This was done with a customer-centric approach. In the B2B space, you often have one shot at fidelising a customer. If you fail they are much less likely to come back.

With this in mind, we got to work to bring in the first 3 suppliers for each category:

Agricultural
Chemicals
Energy
Construction
Main Bulks
Industrial
Metals

BLK Marketplace – Value of commodities in stock over time

Q2 of 2020 was when things started to pick-up. We agreed strategic partnerships with UK and India-based producers of semi-finished metal products, then onboarded the first chemical suppliers.

In December 2020 our big breakthrough: our first transaction. We are now post-revenue.

From the beginning of 2021, with the birth of our Supply Chain division, we targeted SMEs and large corporate businesses, some of which are blue-chip, publicly-listed entities.

We have now shifted gears, driving supply onto the marketplace thanks to the increased demand.

The strategy is to sign large buyers on, let them bring in their own suppliers, to get cash-back on their orders. We share the profits we earn with them and the growth becomes exponential.

Between Q1 and Q2 2021 we grow 265%, with an average annual compound growth rate of 277.8% and an overall growth of 3225% between 2019 and 2021.

Underlying Commodity Asset Value Distribution by Category

BLK Marketplace – Commodities value distribution by category

To date, suppliers on our marketplace trade $332M-worth of chemical commodities (31% of the total value of goods for sale on BLK); $242M of metal products (including grade A steel, stainless steel and high-strength alloys); $238M of Agricultural goods (22% of the total) and $219M of energy products (20% of the total).

BLK Marketplace – Commodities distribution by quantity

Metals account for the vast majority of the overall quantity in sheer weight – nearly 1 million tons.

In second place come construction materials, with one supplier stacking a whopping 220,000+ tons of aggregates, cement, construction sand and bentonite, the main component of the clay used to fabricate bricks, fuelling the booming housing market in the UK and Europe.

Main Bulks, which cover fly ash, sand and lower-value commodities, together with Industrial products (mainly lubricants and specialised chemicals) account for a 4% of the overall stock value traded on BLK, with an overall 16% in terms of sheer volume contribution. The reason for this is that these are generally high-volume, low-value commodities.

Outlook

As we move forward into the second half of 2021 and further into 2022, we will continue seeing a significant and steady growth in our marketplace activity.

With a few deals under negotiation, our short-term pipeline already holds a further half-million tons of energy products, which will account for an additional $300M in stock value in the next 3-6 months.

Contacts & Additional Info

For additional information on our growth, projections and performance, contact our investor relations at info@blk-global.com

or Gabriele Dadò – Founder & CEO, at gabriele.dado@blk-global.com

To learn more about BLK, our proprietary Rating system and how we assess quality, ensuring security on all transactions and differentiating from all vertical-focused marketplaces, check out our LinkedIn page or see our blog.