SOCAR among applicants for diesel fuel supply to Ukrainian railways

Fourteen companies have submitted documents to participate in the tender of Ukrzaliznytsia (Ukrainian Railways) to sign framework contracts for the supply of 205,912 tons of diesel fuel during 2021, Report informs referring to ProZorro open-source government e-procurement system.

The main pool of applicants consists of companies that signed a framework agreement with the railway last year. In particular, these are OKKO, Anvitrade, Torum, SOCAR Ukraine, Gaztrim, Glusco Ukraine, Alliance Energo Trade, Oil Trade 2018, Levine Torg, and Yuzhnaya Toplivnaya Kompaniya.

This year Maddox Ukraine, Parallel-M-LTD, Vog Trade Resource, and Martin Trade can also join them.

Meanwhile, of those who signed the framework agreement in 2020, Alpen Trade, a trading structure of the international trader Coral Energy and the state-owned UkrGasVydobuvannya, didn't submit applications.

"Experience shows that only three companies out of 12 supplied diesel fuel under framework contracts last year. The established limit price of the resource at $814.86 won't allow us to compete with traders who offer Russian and Belarusian resources at a purchase price. This is good for the railway, but for us, it is just a waste of time," explained Serhiy Fedorenko, commercial director of the UkrGasVydobuvannya, which refused to take part in the tender.

The framework tender for 2021 was announced in September 2020. The marginal purchase price is set at $840.83, with the average market price at the traders' application date at $845.33, according to the A-95 Consulting Group.

When purchasing under framework contracts, the same formula pricing is retained. For most market participants, it calculates the price for 10 Med FOB Italy quotes before receiving the fuel shipment order at the exchange rate on the date of the order. A fixed margin in hryvnia will be added to it, which will be determined by auction.

In 2020, competition in the auctions increased sharply, which led to a decrease in the estimated margin: in 2019, it was $60-70 per ton, while at the last auctions of 2020, it fell to $30 per ton. Wexler Group became the largest supplier of the Ukrainian Railways in 2020.

Formula pricing for purchases of petroleum products was introduced at the Ukrainian Railways in the autumn of 2018, bringing the purchase prices down to the level of wholesale prices, while earlier premiums reached $100 per ton.